Ethan Allen Interiors Inc. (ETH), Visa Inc. (V) - Why Is Ethereum Surging, Outperforming Bitcoin Today?
Gains in Bitcoin (BTC) appear faint in comparison with Ethereum (ETH) as the latter’s supply diminishes.
What Happened: BTC traded 0.13% at $59,285.22 over 24 hours at press time while ETH was up 4.08% at $1,925.03.
Over a seven-day trailing period, ETH has surged 21.92%, while BTC has moved up 12.77%.
CryptoQuant data indicates ETH reserves held in all wallets fell to 19.53 million as of March 31 as prices soared over $1,921.
ETH Held In All Exchange Wallets — Data From CryptoQuant.com
On Wednesday, OpenSea, a non-fungible token marketplace said it would add support for trading through Immutable X, a decentralized protocol built on Ethereum, which it said would enable zero gas fee.
Immutable X is coming to OpenSea! We’re excited to announce OpenSea will soon support the trading of NFTs on their gas-free layer-2 protocol, built directly on Ethereum. #Immutable #OpenSea pic.twitter.com/B3Y5j7Lfue — OpenSea (@opensea) March 31, 2021
Why It Matters: BTC has been losing its dominance as the largest cryptocurrency by market capitalization of late. This week the dominance fell to its lowest since October last year.
At press time, BTC had a 56.6% dominance, while ETH had 11.7%, according to CoinMarketCap data.
On Monday, Visa Inc (NYSE:V) announced a pilot to allow transactions to be settled through USD Coin (USDC) on its network.
Reacting to the development, analyst Michaël van de Poppe said on Twitter that Ethereum was “going to surprise everyone massively."
He had previously predicted a $10,000 price level for ETH.
© 2020 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.
Bitcoin logs over 800% jump for FY21, Ethereum zooms 1,300%
In a year when covid-19 dominated every conversation, cryptocurrencies gained popularity among investors like no other. The world’s oldest and the biggest cryptocurrency, bitcoin, exploded back into the limelight this financial year, solidifying its reputation as digital gold.
In terms of returns as well, digital assets enjoyed a commanding lead over other asset classes. Bitcoin delivered a return of over 800% during the financial year 2020-21. From the $6,641 level on 1 April 2020, the price of the digital currency zoomed to an all-time high of $61,711.87 (hit on 13 March 2021) during the year. It was trading at $58,587.75, down 0.5% at around 8.10pm IST on Wednesday, as per CoinGecko.
Bitcoin topped the $50,000 level for the first time on 16 February 2021, nearly a decade after the cryptocurrency hit the $1 mark on 9 February 2011.
In comparison, the BSE Sensex has delivered around 75% returns, while gold was flat for the financial year 2020-21.
View Full Image Bitcoin surge
According to experts, the first leg of the rally in bitcoin during the year came on the back of retail demand, as individuals globally looked at the cryptocurrency as a hedging option against inflation. The second leg of the rally came as bitcoin went mainstream with many major institutions backing the crypto asset.
It all started with the US-based enterprise software company MicroStrategy Inc, which in August said that it was using existing cash on its balance sheet to acquire the cryptocurrency. As of 12 March 2021, the company was holding $5.1 billion worth of cryptocurrency on its balance sheet.
Elon Musk-led Tesla Inc disclosing its $1.5-billion investment in bitcoin in February was another big boost for the cryptocurrency. Tesla is so far the biggest company in the world to back the digital asset. Musk is one of the prominent names that have come out in support of cryptocurrencies during the year.
Moreover, companies such as Goldman Sachs, BNY Mellon, BlackRock, MasterCard, PayPal, and Visa have adopted bitcoin into their ecosystem.
“Visa recently announced that it would allow settlements in USDC on ethereum blockchain and is already seeing huge demand for it. In other major development, PayPal will allow its US crypto holders to pay in cryptocurrencies across its global merchant base," said Ashish Singhal, chief executive officer and co-founder, CoinSwitch Kuber.
Both these developments are quite significant, as it is pushing crypto assets and its usage into the mainstream adoption.
“These developments are driving the latest bitcoin rally, which is pushing the bitcoin value to $60,000 level, once again. We can expect bitcoin to touch $70,000 in April, if the bull market continues," said Shivam Thakral, CEO, BuyUcoin.
However, the adoption by institutions has come at a cost. “Until 2020, bitcoin’s performance was largely uncoupled from the performance of global financial markets, in general. But as the institutional money has started to pile into the crypto space, we can no longer disregard the narrative and events driving global financial markets," blockchain data and intelligence provider Glassnode said in a recent note.
Meanwhile, the world’s second biggest cryptocurrency, ethereum, has gained a whopping 1,272.9% over the last one year. From the $130 level, the digital asset is trading around $1,828 level, as of 31 March.
Since October 2019, ethereum has been slowly but gradually stealing the market share from bitcoin. “In a little more than 1.5 years, ethereum’s dominance has gone from roughly 8% to 11.25%. The bulk of this market share can perhaps be attributed to the growth of various decentralized apps and crypto innovations on the ethereum blockchain, such as DeFi and NFTs," global crypto exchange Kraken said in a note.
NFTs (non-fungible tokens) and DeFi (decentralized finance) are smart contracts built on ethereum.
In terms of outlook of the world’s top two cryptocurrencies, Kraken in a note said: “With bitcoin on the cusp of reclaiming the $60,000 support and potentially even surpassing the current all-time high of $62,000, bitcoin appears incredibly well positioned to steal market share from the altcoins, should it go parabolic yet again."
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Ethereum developers say an upgrade that will destroy coins is very popular with users after tensions with miners rise
The cryptocurrency ether runs on the Ethereum network. Dado Ruvic/Reuters
Ethereum developers have defended the changes to the network that will come in the summer.
They said the alterations are very popular with users, as they make fees simpler and limit ether supply.
But miners remain disgruntled that their fees will be cut, with debate in the community ongoing.
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Developers on the Ethereum network have defended major changes that are set for the summer that will destroy ether tokens and cut the fees paid to miners, saying they’re popular with users and could boost the cryptocurrency’s price.
The planned alteration to the network, known in crypto jargon as EIP-1559, “is very popular among Ethereum users as it potentially makes Ethereum a deflationary asset,” Ben Edgington, a developer at ConsenSys, a company closely involved in the network, said on Tuesday.
Ethereum developers approved significant changes to the network that runs the ether cryptocurrency earlier in March. They are set to overhaul the current system under which users send tokens to miners to pay for transactions to be completed in a kind of auction process.
The changes have sparked anger among miners, however, as they would reduce the fees they receive. Some have even proposed a form of strike.
Yet developers say users support the changes, partly because the reduction in coins could lead to the price of ether rising sharply. Ether traded at around $1,800 on Wednesday. The token has gained around 145% so far this year.
Dan Finlay, lead developer on popular Ethereum wallet MetaMask, said: “Its purpose is to provide a more predictable transaction pricing system that reduces overpayment, and has some deflationary economics as a side benefit.”
Under the changes, which will likely come into force in July, users will send a base transaction fee to the network that would then destroy or “burn” ether tokens, thereby reducing the number of coins in circulation.
It will move the system away from the current mechanism, in which users have to bid to have their transactions included in blocks by miners, which can make fees very costly at times.
Edgington said these issues are “a significant problem for the usability of Ethereum and a barrier to the broader adoption of Ethereum by non-specialists.”
Lex Sokolin, co-head of fintech at ConsenSys, said the changes will take the network fees “from having an unpredictable and unbounded pricing mechanism to something that is much more predictable.”
The anonymous founder of Pylon, a major North American ether miner, said there was a lot of “turmoil” in the Ethereum world. They said miners had spent time and money building facilities, and now could be faced with heavy losses due to the changes.
“It goes back to the point [that] developers don’t mine, so they could care less about a miner, and miners don’t develop, so they could care less about reducing the congestion,” they said.
Some ether miners threatened to effectively go on strike, or try to disrupt the system in other ways in protest at the changes.
But there are signs of peace breaking out, with miners proposing their own EIP - which stands for Ethereum improvement proposal - that would raise their rewards and gradually lower them.