Ether Rally Continues, For Now

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Ether (ETHUSD), the digital currency native to the Ethereum ecosystem, is nearing a $2,000 milestone as more institutional buyers have boosted their positions in recent weeks. One Ether is currently equal to $1,962.09, an increase of more than 22 times compared to a year ago.

“We believe investors are looking to diversify and are growing increasingly comfortable with Ethereum fundamentals,” wrote James Butterfill, an investment strategist at CoinShares, in a research note on Feb. 8. The asset manager noted that the total fund flows were “unusually focused” on Ethereum, with 80% of the totaling $245 million allocated to Ethereum.

Grayscale Investment Holdings, the biggest global crypto asset manager, now has 3.16 million Ether under management as of Feb. 18, with Ether accumulation showing the biggest change in its portfolio over the past seven days, according to data compiled by bybt.com.

Institutional buyers, inclusion by companies like PayPal Holdings, Inc. (PYPL), and praise from individual investors like Mark Cuban have helped to make the case for ether. Cuban has said “ETH has an advantage over bitcoin as a store of value,” noting he’s buying more Ether, not Bitcoin (BTCUSD), in an interview with The Defiant podcast.

That makes sense, as Ethereum is more than just a cryptocurrency by design, allowing for so-called “smart contracts” on the blockchain. “Thanks so Ethereum, a blockchain could be about much more than digital currency,” writes Jeff Roberts in his book Kings of Crypto: One Startup’s Quest to Take Cryptocurrency Out of Silicon Valley and Onto Wall Street. “It was now also a one-stop shop where people could sign contracts over anything from sports wagers to investment agreements to data storage.”

In that sense, Roberts compares Ethereum to an ecosystem like Apple, Inc. (AAPL). “It served as a platform much like what Apple provides developers so they can build apps for its iOS operating system,” he wrote. “And unlike Bitcoin, Ethereum offered an easy-to-learn programming language, called Solidity, for anyone who wanted to build applications.”

Like any cryptocurrency, Ethereum exposure is not without inherent risk, with some analysts noting that the behavior of top traders at Huobi, Binance, and OKEx may suggest a “lack of appetite for long positions.” However, other observers forecast the cryptocurrency’s price pushing through to $2,700. Ether is still a relatively new digital currency, and its promise and applications across different industries may take time to unfold.

“Smart contracts on blockchain are real and they remind of the early days on the internet when people realized there was a network effect,” Cuban said, noting that it took 25 years from that early stage of development. “We are right at that point right now where smart contracts on top of blockchain allow people to take anything that’s digital and turn into a product and sell it.”

Ethereum Hits USD 2,000, Outshined by Bitcoin (UPDATED)

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Source: Adobe/duncanandison

The two largest cryptoassets, bitcoin (BTC) and ethereum (ETH), are on their journey of discovering new all-time highs. (Updated on February 1, 06:13 UTC, with the latest market data and comments from Elon Musk.)

Despite its recent high fees-caused problems that helped competitors grow, ETH surpassed USD 2,000 today for the first time, while BTC, which is still a USD 1trn asset, rallied above USD 56,000.

On Sunday (06:08 UTC), ETH trades at USD 1,951, correcting lower from its new all-time high of USD 2,043. The price is down by 3.8% in a day, trimming its weekly gains to less than 8%.

High ETH fees are dampening the rally as DeFi users are migrating towards competing, more centralized chains such as Binance Smart Chain, while competitors are using every opportunity to criticize ETH.

However, at the same time, ETH supply available for trading has been decreasing recently:

ETH locked in DeFi jumped by 16% in a bit more than a month, reaching ETH 7.7m (USD 15bn).

ETH sent to the ETH 2.0 deposit contract, where it’s being locked for many months, surpassed ETH 3m (USD 5.9bn).

Grayscale Ethereum Trust received ETH 222,958 (USD 435m) since its reopening in February.

Meanwhile, at the same time, BTC is trading at USD 56,789, after it hit USD 57,851 yesterday. The price is up by 1.5% in a day and 21% in a week.

The prices of the two largest cryptoassets corrected after Tesla’s Elon Musk said that “BTC & ETH do seem high.” However, both BTC and ETH have rebounded since then with bitcoin showing more strength.

@PeterSchiff That said, BTC & ETH do seem high lol — Elon Musk (@elonmusk)

However, in April 2020, Musk also said that “Tesla stock price is too high.”

@elonmusk Bitcoin price is too low imo — Bitcoin (@Bitcoin)

Since then, the price of one of the hottest stocks went up by 458%. In the same period of time, BTC rallied by 572%, while ETH skyrocketed by 892%.

“I was expecting [BTC] to touch [the USD 50,000] level so that the media could get some headlines and then pull back somewhat considering the relentless one-way move we’ve seen the past 90 days but it’s so far holding up well above USD 50,000 so there is very solid demand holding it up. Still expect strength in the medium term but don’t think it will be without some volatility in both directions,” Jeffery Wang, Head of America’s at the Amber Group, said in an emailed comment.

Also, according to Philip Gradwell, Chief Economist at Chainalysis, low BTC inflows to exchanges and high trade intensity when the price is rising suggests that bitcoin available to buy is falling while demand is rising, which indicates prices should rise.

“However … there may be an increase in trading off of exchanges, for example via Over The Counter (OTC) brokers. So exchanges may not be giving a full picture of market conditions,” he wrote in his newsletter, adding that large investors appear to have reduced their holdings by BTC 192,000 in the week of 8 February.

“It feels to me that we are in a ‘wait and see’ moment,” Gradwell said, noting that while large investors seem to be cautious now, this is being balanced by retail demand on exchanges, which often follows the momentum of the market.

However, one of the most bullish non-crypto companies, US-based software developer MicroStrategy, confirmed yesterday that they were able to borrow over USD 1bn “for free” in order to buy more BTC, showing how strong demand from large investors is.

“The trend is clear: we are in a phase where some people are getting hilariously rich. The last phase of this was late 2017, but the realized gain on exchanges then was half of what it is now. And the gains being made now are equal to half of all the gains that have ever been made,” Gradwell concluded, adding that if all the bitcoin ever deposited on exchanges was bought immediately and then only sold when it was withdrawn, the profit from that trade so far would be USD 78bn.

Learn more:

Why Grayscale And Mark Cuban Bullish On Ethereum At $1,900

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What happened: The second-largest cryptocurrency by market cap, Ethereum (ETH), reached a new all-time high of $1,900 earlier today.

This new high means that ETH is officially up 2000% since March 2020, while Bitcoin (BTC) is up by 1200%.

Why it matters: In the wake of Bitcoin’s disruption, the second-largest cryptocurrency might have been overlooked by newer investors in the crypto space.

However, many analysts and crypto industry proponents believe that at current levels, ETH is undervalued.

Institutions are currently choosing to buy more $ETH than $BTC. Couldn’t be more clear that they see $ETH as undervalued. https://t.co/7E4dV8lLc6 — James Spediacci ⟠ (@JamesSpediacci) February 12, 2021

Leading digital asset manager Grayscale recently opened its Ethereum trust to accredited investors and has since been buying large amounts of ETH each day.

On February 12, the asset management firm bought 52,730 Ethereum, which over $94 million worth of ETH, or $8 million worth of BTC.

Institutional buying and the belief of industry proponents aside, the asset did receive some new backing from popular investors.

Billionaire tech investor Mark Cuban recently stated that “ETH has an advantage over BTC as a store of value.”

The Dallas Mavericks owner is most excited about smart contracts that are developed on the Ethereum blockchain, powering decentralized applications (dApps) and decentralized finance (DeFi).

According to Cuban, most of this innovation is happening on Ethereum, which leads him to believe ETH is becoming a better store of value than BTC.

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