- Bitcoin's all-time high cranks up pressure on Ether to follow suit.
- Investors are counting on Ether ETFs to spur gains.
- An Ethereum upgrade is on the way.
Bitcoin just hit a new high, and the wider crypto market is now worth more than $2.6 trillion.
Ethereum’s not been lost in the bullish run-up, rallying more than 65% since the beginning of the year.
It’s impressive, but sitting at $3,809 in late afternoon trading UK time Wednesday, Ether is still 21% below its all-time high of $4,800.
What gives?
In a word, time.
Szymon Sypniewicz, CEO of crypto onboarding solution Ramp, said it may simply take longer for the market to understand Ethereum’s complexity, especially “compared to the much simpler idea of Bitcoin as digital gold.”
New financial system
Ethereum lovers have long argued the second most valuable blockchain network will be the infrastructure of an entirely new financial system.
Through smart contracts, supporters point to a future with more transparent markets, tokenised versions of popular funds, and faster settlement times.
Others say it’s only a matter of time before institutional investors take bigger positions in Ether. And the advent of Bitcoin ETFs may be increasing their appetite.
“ETH hasn’t hit its institutionalised hype cycle yet,” like Bitcoin has, Robby Greenfield, co-founder and CEO of payments protocol Umoja Labs, told DL News. “Thus, the vast majority of new inflows from the BTC ETF will naturally lead toward greater buy pressure, along with the upcoming BTC halving,”
Greenfield predicted that Ethereum will close the gap with Bitcoin in terms of its gains.
He told DL News the cryptocurrency should “clear $10,000 this year.”
Greenfield added that an Ethereum ETF approval would undoubtedly help drive up its value. He joins a host of industry players counting on the US Securities and Exchange Commission to follow up its January approval of Bitcoin ETFs with a green light for Ether.
‘It’ll be good for investors to have access to ETH in a way that’s easy and familiar.’
— Eugene Cheung, Bybit
“An ETH ETF should naturally be approved,” Eugene Cheung, Bybit’s head of institutions, told DL News. “It’ll be good for investors to have access to ETH — one of the world’s premier risk assets — in a way that’s easy and familiar.”
Maybe so, but the SEC, and especially its hard-charging chair, Gary Gensler, may take a different approach to an Ether ETF.
Gensler acknowledged reluctantly clearing the way for Bitcoin after the commission lost a court ruling in its effort to stop Grayscale from converting its BTC trust into an ETF.
There is no such court case driving decision-making on an ETH ETF.
The SEC is expected to weigh in on a slew of different Ethereum ETF applicants, including those from BlackRock and Fidelity, in May.
Crypto prediction market Polymarket puts the odds of approval at 43%. JPMorgan’s latest analysis gives it a 50% chance.
Bloomberg ETF analyst Eric Balchunas called an Ethereum ETF “small potatoes,” characterising it as “the opening act coming on after the headliner.”
Ethereum upgrade
JPMorgan does, however, point to another catalyst for Ethereum: the Dencun upgrade, which is designed to help the network scale up by cutting costs for various rollup solutions on the market.
Rollups batch crypto transactions, be they simple swaps or borrowing activity, into much smaller chunks of data.
These small chunks are then settled on Ethereum, reducing the overall data footprint on the network.
Bybit’s Cheung says this is good news for Ethereum supporters.
“With layer 2 solutions built on top of Ethereum, the blockchain is becoming the settlement layer for a whole new digital infrastructure encompassing gaming, trading, and investing,” he told DL News.
“The value of all of this will tend to accrue to the ETH asset.”
Unlike Bitcoin’s automated halving event, Ethereum’s Dencun upgrade does not regulate the cryptocurrency’s scarcity. In contrast to Bitcoin’s pre-programmed 21 million token cap, Ethereum’s supply is infinite.
Not a sure thing
Still, the upgrade’s success isn’t a sure thing for the asset’s price performance.
The layer 1 competition is heating up, and one exec says Ethereum may even be overtaken this cycle.
“Given the network’s poor performance during periods of high activity and the proliferation of alternative layer 1 protocols that have optimised for Ethereum’s shortcomings, Ethereum’s position as the second-ranked cryptocurrency is not necessarily guaranteed this cycle,” CMO of crypto exchange VALR, Ben Caselin, told DL News.
Liam Kelly is DL News’ Berlin correspondent. Contact him at liam@dlnews.com.
