The price of Ether is one to watch closely as the popular cryptocurrency powering the Ethereum blockchain, has surged past Bitcoin (BTC) in its recent rally. Over the past week, ETH has soared by over 16%, surpassing the $2,900 mark for the first time in almost two years. This notable surge, first reported by CoinPayments on 14 February when the price stood at $2,654, stands in contrast to Bitcoin’s more modest 8.5% increase, with BTC trading at $52,300. Analysts are now pointing to Ethereum’s promising fundamentals as a potential driver for further gains.
Greg Magadini, the director of derivatives at Amberdata, highlights the fundamental strengths of Ethereum, suggesting that they may outweigh those of Bitcoin. In his words, “The fundamentals for Ethereum’s native token appear more favourable than those of the larger crypto.”
Unlike Bitcoin’s upcoming halving, which only slows its rate of growth, Ethereum has undergone a significant reduction in its supply since transitioning to a proof-of-stake consensus mechanism in September 2022—a transition known as The Merge. This reduction has led to a deflationary trend, with a substantial portion of Ether supply being taken out of circulation through burning mechanisms.
Since The Merge, Ethereum has witnessed a net reduction in its supply, with over 1.4 million ETH being burned—a stark contrast to Bitcoin’s supply increase during the same period. The implementation of validators, who stake a minimum of 32 ETH to secure the blockchain, has played a crucial role in this reduction. Currently, over 25% of the total circulating supply of Ether is staked or locked in the network, further contributing to supply constraints.
Institutional interest in Ethereum is growing, particularly with the anticipated approval of spot ether ETFs by the Securities and Exchange Commission (SEC) in the U.S. Traditional finance giants such as Franklin Templeton, BlackRock, and Fidelity have all submitted applications for such ETFs, signalling confidence in Ethereum’s long-term prospects. The recent approval of spot BTC ETFs has further fuelled speculation about the potential for ETH ETFs, with analysts suggesting a bullish outlook for Ethereum’s supply dynamics.
Although Bitcoin continues to enjoy institutional interest, the spotlight is now shifting towards Ethereum, according to brokerage firm Bernstein. With the recent success of BTC ETFs, attention is turning to the possibility of similar products for Ether.
Bernstein said in a research report on Monday that Ether is “probably the only other digital asset likely to get a spot ETF approval by the SEC.” Bernstein predicts a 50% chance of spot ETF approval for Ether by May, with near-certain approval within the next 12 months.
Analysts at Bernstein emphasise Ethereum’s distinct advantages, including its staking yield dynamics, environmentally friendly design, and institutional utility for building new financial markets. These factors position Ethereum favourably for mainstream institutional adoption, offering unique opportunities for tokenized financial markets on the Ethereum network.
Ethereum’s upcoming upgrade, Dencun, scheduled for March, is expected to further enhance its capabilities. This upgrade will provide dedicated corridors and block space for roll-ups, significantly reducing transaction costs by up to 90%. Such improvements are poised to strengthen Ethereum’s appeal among institutional investors and bolster its position in the cryptocurrency market.
In conclusion, Ethereum’s recent performance and promising fundamentals indicate a growing confidence in its long-term viability. With institutional interest on the rise and key upgrades on the horizon, Ethereum appears poised to solidify its position as a leading cryptocurrency in the digital asset landscape.
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