Ether Outshines Bitcoin: Will the Trend Continue?

Ether Shows Strong Performance with 16% Rally in Seven Days, Outpacing Bitcoin's 8.5% Increase

Analyst says Ethereum’s supply outlook is better than Bitcoin’s as ETH exceeds $2.9K.

Ether (ETH), the second-largest cryptocurrency by market value, has taken the lead in the past week, outperforming bitcoin’s (BTC) rally. This trend may continue as Ethereum’s native token, ETH, shows more promising fundamentals than its larger rival, according to Greg Magadini, Director of Derivatives at Amberdata.

In just seven days, Ether has surged over 16%, reaching a price above $2,900 for the first time in nearly two years. On the other hand, the bitcoin price experienced a more modest 8.5% increase, settling at $52,300 [^1^]. The ether-bitcoin ratio has also seen a significant jump of nearly 7% to 0.055 [^1^]. The broader crypto market, as measured by the Blocking.net Indices CD20, has seen a rally of 10.7% [^1^].

Ether’s recent outperformance comes after weeks of trailing behind bitcoin, as investors were primarily focused on the launch of spot BTC exchange-traded funds (ETFs) in the United States and the upcoming quadrennial reward halving for bitcoin [^1^]. However, attention may soon shift to a significant drop in Ether’s supply since Ethereum’s transition to a proof-of-stake consensus mechanism in September 2022, known as “The Merge” [^1^]. This shift in Ethereum’s supply dynamics contrasts with Bitcoin’s halving, which only reduces the rate of growth for the cryptocurrency.

According to Magadini, “Everyone is talking about the Bitcoin halving in April, but that’s nothing compared to the active ‘REDUCTION’ in ETH supply already occurring since Sept. 2022. ETH is the next play here! Low ETH/BTC ratio, actively finding a bid, [with ETH’s] fundamental supply picture even better than BTC” [^1^].

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Since The Merge, approximately 1,047,643 ETH (worth $3.05 billion) have been issued, while 1,407,200 ETH have been burned, effectively reducing the net supply by 359,557 ETH or 0.209% on a yearly basis [^1^]. In comparison, Bitcoin’s supply has increased by 1.71% during the same period [^1^].

This reduction in Ether’s supply is a result of Ethereum burning a portion of the transaction fees paid to validators, as the network replaced miners with validators [^1^]. As validators secure the blockchain by staking a minimum of 32 ETH, a significant amount of ether is taken out of circulation. Currently, over 30.1 million ETH, which accounts for 25% of the total circulating supply, has been staked or locked in the network [^1^]. The forthcoming Dencun upgrade in March is also expected to reduce transaction costs.

Another factor contributing to Ether’s optimistic outlook is the potential approval of spot Ether ETFs by the U.S. Securities and Exchange Commission (SEC) later this year. Several asset management firms, including Franklin Templeton, BlackRock, Fidelity, Ark and 21Shares, Grayscale, VanEck, Invesco and Galaxy, and Hashdex, have submitted applications to launch these ETFs [^1^].

The SEC recently approved nearly a dozen spot BTC ETFs, allowing investors to gain exposure to bitcoin without the need to own and store the actual coins. Since their launch on January 11, the BTC ETFs have attracted significant inflows of approximately $5 billion, creating excitement around the potential for ETH ETFs [^1^].

“Combine this ETH ‘Supply BURN’ with dormant STAKED ETH and mix in a SPOT ETF actively putting ETH into cold storage … all of a sudden, the supply story for ETH is as bullish as fundamentals can get,” suggests Magadini [^1^].

With Ether’s supply decreasing and positive developments such as the transition to a proof-of-stake consensus mechanism, ETH’s future appears bright. The potential approval of spot Ether ETFs in the U.S. and the continuous shift from miners to validators may further enhance Ether’s position in the market and potentially lead to substantial growth [^1^].

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Q&A: Answering Your Questions About Ether’s Rise and Future Outlook

Q: Why has Ether outperformed Bitcoin in recent weeks? A: Ether’s recent outperformance can be attributed to several factors. While traders primarily focused on the launch of spot BTC ETFs and Bitcoin’s upcoming halving, attention shifted to Ethereum’s supply reduction due to the transition to a proof-of-stake consensus mechanism. This reduction, combined with Ether’s low ratio compared to Bitcoin, has made ETH an attractive option [^1^].

Q: How has The Merge affected Ether’s supply? A: The Merge has significantly impacted Ether’s supply by burning a portion of the transaction fees paid to validators. As Ethereum moved from miners to validators, a substantial amount of Ether has been staked, effectively reducing its availability [^1^].

Q: What impact could the potential approval of spot Ether ETFs have? A: The approval of spot Ether ETFs by the SEC could provide a significant boost to Ether’s market. Similar to spot BTC ETFs, Ether ETFs would allow investors to gain exposure to Ether without the need to directly hold the cryptocurrency. This could attract more institutional and retail investors, potentially leading to increased demand for Ether [^1^].

References: [^1^]: Blocking.net. Ether Outshines Bitcoin as Fundamentals Look Favorable.

Now that you have gained insights into Ether’s rise and future outlook, share your thoughts! Do you believe Ether will continue to outshine Bitcoin? Let us know in the comments below and don’t forget to share this article with your friends on social media!

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