Ether price experienced a significant increase of 13.5% between January 10 and January 12, surpassing $2,650 for the first time since May 2022. This surge in price can be attributed to the approval of the spot Bitcoin (BTC) exchange-traded fund, despite Bitcoin itself experiencing a 2% decline during the same period. Now, investors are questioning whether Ether (ETH) has the potential to maintain its current market capitalization of $322 billion.
Over the past 60 days, Ether has outperformed Bitcoin, with a price increase of 27% compared to Bitcoin’s 24% increase. This is quite impressive considering that the approval of the spot BTC was expected to have a positive impact on its price by attracting new clients who were previously unable to acquire cryptocurrency directly. Bloomberg ETF analysts estimate a 70% chance of an Ethereum ETF approval by May, compared to a 95% chance for Bitcoin.
Asset managers such as BlackRock, Fidelity, Grayscale, and VanEck, along with others, are anticipating the final decision on the spot Ethereum ETF by the U.S. Securities and Exchange Commission, which is expected by May 23. However, some analysts believe the decision may come sooner than anticipated, considering that Bitcoin has already paved the way. The SEC has set intermediary deadlines in late January for some of the ETF applicants.
The bullish momentum of Ether can be attributed to factors other than the approval of the spot BTC ETF. Firstly, Ethereum’s direct competitors experienced a correction after significant rallies. BNB declined by 2% in the seven days leading up to January 12, while SOL dropped by 3% in the same period.
SOL’s bullish momentum faded after the successful SPL token airdrops faced significant price corrections. Additionally, the decentralized applications (DApps) activity seemed to be concentrated on a few projects with imminent token launches, which also faded after the respective snapshots. As a result, investors’ interest in Solana’s SOL token started to diminish.
BNB experienced impressive gains of 35.7% between December 17 and 27, 2023, but the bullish momentum was not supported by network activity. In fact, BNB Chain’s active DApp addresses declined by 61% in the seven days ending January 12, and the number of transactions dropped by 64%, according to DappRadar. In comparison, Ethereum only experienced a 2.2% decline in active addresses and a 0.3% decrease in volumes during the same period.
Despite the current depression of the nonfungible token (NFT) markets compared to their peak in 2021, Ethereum’s network remains the leader in terms of value, including leading collections such as CryptoPunks, Bored Ape Yacht Club, Pudgy Penguins, and Azuki. Users of Ethereum decentralized finance (DeFi) applications and top NFT assets are not concerned about the average transaction fee of $6.30.
Ether’s price has also benefited from its annualized staking reward of 4.3% and a slightly negative issuance rate. Approximately 24% of the circulating ETH supply is locked up through staking, which fuels investors’ expectations for price growth. In contrast, Solana’s adjusted staking reward is only 0.8% due to its high SOL issuance rate.
The Ethereum network is expected to undergo a hard fork that will bring significant advancements in its technological capabilities. The upcoming “Dencun” fork focuses on improving data availability and reducing costs for rollup transactions, with its first testnet implementation scheduled for January 17. Another anticipated improvement is account abstraction, which enables lower transaction costs and secure social logins.
Ethereum has faced criticism for its limited scalability and privacy solutions in the base layer. Therefore, it is essential to streamline the process of accessing second layers to enhance user experience and reduce costs. Consequently, Ether’s rally above $2,600 is not solely attributed to the spot ETF approval but also reflects Ethereum’s dominance in the smart contract industry.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making any investment or trading decisions.