Ethereum Boom Continues

ETH has hit new all-time highs on the back of the Defi and NFT boom, the launch of futures and upcoming updates. But Ethereum has a tough battle ahead with its competitors.

 Ethereum Increases Its Dominance

In early January of this year, we were doing an analysis of the cryptocurrency market and wrote about why it was the turn of Ethereum to rise higher. Without going into the details of what was already said at the time, suffice it to say that most of the factors mentioned at the time played well into the hands of the second-largest cryptocurrency. The only thing that was not expected at the time was the exponential growth of NFT seen in the last few months.

The overall cryptocurrency market continues to grow as the Defi boom continues, institutional interest continues to grow, NFTs have actively joined the game, and Ether futures have been launched. Looking at the price movement (at the time of writing, ETH has increased by 7.82% in the last 24 hours, and by 31.66% in the last 7 days), since the beginning of the year, the leading smart contract platform has shown a significant increase of 350%.

Crypto analysts point to a broader awareness of the Ethereum smart contract platforms that are shaping the landscape for NFT, Web 3.0 applications, and decentralized finance (DeFi). In fact, the amount of capital locked into the DeFi protocols has just surpassed $73 billion, an increase of thousands of percent since the beginning of the year. Last week, the European Investment Bank even announced that it had issued two-year notes worth 100 million euros ($121 million), using the Ethereum blockchain for the first time.

With a current market capitalization of $389 billion, Ethereum has overtaken legacy institutions such as The Walt Disney Company and Bank of America in terms of total market capitalization. The growing influence of ETH in the Cryptoverse has also severely eroded Bitcoin’s dominance, which has fallen to a three-year low of 47.2% from record highs of around 70% at the end of last year.

Ether futures also soared. According to Crypto Compare, in terms of total US dollar trading volume, recently launched CME ETH futures reached $1.5 billion in March (up 51.3% from February). Meanwhile, BTC futures volumes on the CME declined 0.5% to $59.4 billion. Overall, ETH currently accounts for 13% of AUM (assets under management) across all digital asset investment products.

Although Ethereum and Bitcoin are still linked, the correlation between them is shrinking (figure above). Ether has quadrupled this year, while Bitcoin hasn’t even doubled, and the ratio between the currencies recently climbed to 0.052, the highest level since mid-2018. BTC is seen more as a means of saving and long-term investment, while ETH is seen as a reserve asset DeFi (can receive interest on them, or borrow against them), which creates leverage and liquidity in the new system.

Big competition is coming

While Ethereum has been basking in the glory of its astronomical rise, competition is just around the corner – with the likes of Polkadot and Cardano. The growing popularity of Ethereum in recent weeks and months has led to exorbitant transaction fees on its blockchain. While this pressure has eased somewhat recently, the continued growth in the DeFi space and the lack of viable second-tier scaling solutions have led to ETH’s competitors being activated, as seen with the surge in activity.

At the same time, Ethereum supporters pin their hopes on the possible transition of the project to ETH 2.0 – a much more scalable Proof of Stake platform, which will also significantly reduce the commission, as well as reduce the amount of ETH rewarded to miners, which, in turn, is expected to reduce the pressure from sellers on the asset.

In the meantime, let’s watch the rise of the powerful Ethereum.