Skip to Content

Ethereum is leaving bitcoin in the crypto dust

KMIZ

Hunter S. Thompson once wrote, “There is nothing in the world more helpless and irresponsible and depraved than a man in the depths of an ether binge.” He was referring to the intoxicating drug, not the cryptocurrency. But ethereum investors may have reasons for fear and loathing, too.

The world’s second-most valuable cryptocurrency has soared even more than bitcoin in 2021 thanks to non-fungible token mania and increased adoption of ethereum — ether, for short.

Ether prices are now hovering around $3,400, a more than 350% gain this year. Bitcoin prices have risen a “mere” 90% by way of comparison. In the past week alone, ether is up a staggering 30% while bitcoin is flat. That has raised some concerns that ether has risen too far, too fast, just like bitcoin did in 2017 before plunging spectacularly in 2018.

So why has ethereum, which now has a combined market value of almost $400 billion for all its coins in circulation, taken off lately?

Ether is the main currency of choice used to purchase non-fungible tokens, or NFTs, the digital assets that have become increasingly popular in the art and sports collectibles world.

“Why is there so much interest in ether right now? With the explosion of NFTs, people are viewing alternatives to bitcoin like ether as a real utility. It’s not just a store of value, the digital gold that bitcoin is,” said John Wu, president of Ava Labs, an ethereum-compatible blockchain firm.

Wu added that ether is also getting a boost thanks to two other more technical developments.

Coinbase, the giant crypto brokerage firm that recently went public, is now supporting transactions for Tether and USD Coin, two so-called stablecoins that are pegged to the dollar. Each of them are compatible with ethereum digital wallets.

Ether also just went through a hard fork — essentially an upgrade to the ethereum blockchain network that will help increase transaction speeds.

Ether, like bitcoin, is going mainstream

But ether’s rise goes beyond technical reasons.

“There is a real, fundamental, and persistent demand shift happening right now,” said Jeff Dorman, chief investment officer at Arca, in a blog post this week.

He said that up until recently, new cryptocurrency investors only cared about bitcoin. Then they started to show interest in other cryptocurrencies, particularly ethereum, as a way to diversify their holdings.

“Ethereum has now crossed the Rubicon into the mainstream, and despite the difficulty understanding it, investors of all sorts are finding reasons to add ETH to their portfolios,” Dorman wrote.

S&P Dow Jones Indices has validated cryptocurrencies as well. The index provider behind the Dow and S&P 500, said Tuesday that it was launching a bitcoin index, ethereum index and cryptocurrency megacap index.

“Traditional financial markets and digital assets are no longer mutually exclusive markets,” said Peter Roffman, global head of innovation and strategy at S&P Dow Jones Indices, in a press release.

Investors may also be flocking to ethereum as well as other cryptocurrencies because there are rising concerns about inflation looming on the horizon as the global economy and US job market heats up.

Hedge against central banks printing more money

Ether is part of the so-called decentralized finance, or DeFi revolution that offers financial products which don’t rely on central banks.

“With inflation rising, DeFi products on ethereum are the perfect way for people to combat the uncertainty created by central bank money printing and various supply shocks,” said Sergey Nazarov, co-founder of Chainlink, in an email to CNN Business.

All that said, investors probably need to be careful. Ether’s rise has been so sharp and sudden that one can’t help but expect an eventual pullback like Bitcoin had in 2018 after it first enjoyed a massive surge.

But Tally Greenberg, head of business development at Allnodes, a cryptocurency hosting provider, said she’s not worried that ether will suffer the same fate.

“I’m not sure that ether will dip that much,” she said. “Yes, its price may fluctuate. But ethereum may have even more potential than bitcoin.”

Article Topic Follows: Money

Jump to comments ↓

CNN Newsource

BE PART OF THE CONVERSATION

ABC 17 News is committed to providing a forum for civil and constructive conversation.

Please keep your comments respectful and relevant. You can review our Community Guidelines by clicking here

If you would like to share a story idea, please submit it here.

Skip to content