Ether surpasses $4,000, up 464% in a year, can its market cap surpass Bitcoin?

“Shoot off your thighs”, “didn’t have time to get on board”, “ethereum turned on flight mode”, these words are probably the most realistic reactions of investors facing ethereum recently.

OKEx quotes show that as of 17:00 on May 9, Ether broke through the $4,000 barrier, touching a high of $4,166, up 464% this year, far exceeding Bitcoin’s 109% increase over the same period.

Ether surpasses ,000, up 464% in a year, can its market cap surpass Bitcoin?

Meanwhile, Ether’s market cap has also grown significantly. Its current market cap is about $468.4 billion, gradually increasing its share of the total cryptocurrency market cap to 18.8% and surpassing Johnson & Johnson in the 15th place in the global asset ranking. The ethereum/bitcoin market cap ratio has also surpassed an all-time high, with bitcoin’s market cap now at $1.11 trillion, or 42.2%.

Why is ethereum outperforming bitcoin?

In a report dated April 27th, JP Morgan analyst Joshua Young said the following about ethereum, which has been rising more aggressively than bitcoin

First, ethereum’s liquidity is more resilient. The liquidity shock in the crypto derivatives market caused a huge liquidation in which the bitcoin futures market was much more affected than the ethereum futures market. During the market recovery phase, the depth of Ether trading recovered quickly. Secondly, the Ether spot exchange rate is much higher than Bitcoin, which means that long Ether positions prefer to hold spot rather than futures and perpetual contracts. Finally, the trading activity of the Ether network demonstrates the richness of its on-chain activity, including the growing DeFi and other areas of the ecosystem.

JPMorgan said there are significant differences between Ether and Bitcoin. Bitcoin is digital gold, which is a store-of-value asset. Ether, on the other hand, is the backbone of the cryptocurrency eco-economy and acts as a medium of exchange in the ecosystem.

On Friday, another JP Morgan analyst, Nick Panagirtzoglou, released a new report, laying out six original reasons behind being long on ethereum.

  1. Last week the European Investment Bank (EIB) issued €100 million of two-year, zero-coupon digital notes using the Ether blockchain network, the first time EIB has issued digital bonds. The deal involves a series of bond tokens on the Ether blockchain, which investors can use to buy and pay for security tokens. This move by the European Investment Bank is undoubtedly significant, indicating the recognition of the Ether blockchain network by mainstream official institutions.

2.Canada’s Purpose Investments launched its first Ether ETF (ETHH) on April 20, and three more Ether ETFs were launched back-to-back in the same month. The listing of Ether ETFs provides a compliant access to capital for investors in traditional financial markets.

3.The supply of Ether may fall due to the upcoming introduction of the EIP 1559 protocol this summer. the main effect of the EIP 1559 protocol is to significantly improve the way transaction fees are calculated. By introducing an automatically calculated base fee, it makes transaction fees on the ethereum blockchain more measurable. As explained in the JP Morgan report, once a user pays with Ether, the fee will be immediately burned, which means less supply of Ether in the future. With Ether circulation growing at 5% per year for the past three years, the theoretical unlimited supply of Ether has been a concern. And The introduction of EIP 1559 protocol may reduce the annual circulation of Ether to 1-2%.

4.Ethernet 2.0 upgrade will make it from energy-intensive “Proof-of-Work validation” to “Proof-of-Stake” (Proof-of-Stake) This means that Ethernet will become more energy efficient by the end of 2022, with less computing power and energy required to maintain the Ethernet network.

5.The dramatic growth of NFT (Non-Fungible Token) and stablecoins in recent months has increased the use of Ether, which has dominated the DeFi (decentralized finance) ecosystem.

  1. The report concludes by mentioning that higher US bond yields and the eventual normalization of monetary policy may combine to put downward pressure on Bitcoin as digital gold. Ether is gaining value from its applications, such as DeFi, games, NFTs, and stablecoins, which make it less susceptible to higher real yields than Bitcoin.

Is ethereum market cap set to overtake bitcoin?

As the price of ethereum continues to soar, and the after-market is generally bullish. For a while, there was a lot of talk that ethereum’s market cap would surpass bitcoin.

Unlike Bitcoin’s constant total of 21 million pieces, there is no upper limit to the supply of Ether. The current circulation of Bitcoin is 18.757 million, while the circulation of Ether is about six times that of Bitcoin, i.e. 116 million, which means that if the price of Ether exceeds one-sixth of Bitcoin’s, the market capitalization will be doubled.

Analyst Messari, who is engaged in digital asset investment research, predicted that Bitcoin’s position in digital currencies could be replaced by Ether sooner with the launch of the Ether 2.0 upgrade.

Currently it seems that mainstream opinion is that Ether will rise to $10,000 after the completion of EIP-1559, and Jiang Zhuoer, founder of Lepit Mining Pool, even believes that Ether reaches $20,000 in the current bull market. If the current bull market, the price of ethereum can really reach this level, it is not impossible to surpass bitcoin.

Some of the data is already emerging. According to cointelegraph, on May 4, the total volume of ETH contracts traded across the network reached $87 billion, surpassing the $81 billion total volume of bitcoin contracts for the first time in history.

According to Google trends, searches for the keyword Bitcoin have so far not surpassed the previous bull market high of late 2017, while searches for Ethereum have long surpassed the previous high and continue to climb, demonstrating the enthusiasm of new users.

In terms of on-chain trading data, Bitcoin’s on-chain trading volume has been flat for years due to block size limitations, while Ether’s on-chain trading volume has been steadily increasing. It is foreseeable that ETH will leave BTC behind even more significantly in the future from the indicator of on-chain data.

What’s more, the burning mechanism of EIP-1559, the ETH lock-in of ETH 2.0 which doesn’t count as growth and the ETH locked-in in DeFi will all lead to a decrease in the circulation of ETH. In other words, after the ETH-1559 mechanism opens, the original uncapped issue of Ether will also start to deflate, which will have an upward impact on its price.

Nevertheless, there are still many uncertainties for Ether to surpass Bitcoin.

First, there are a number of potential technical risks associated with ethereum. Compared to the conservative and stable Bitcoin system, which has been running for more than a decade, Ether is an evolving system, which is more than an order of magnitude more complex than Bitcoin in terms of the number of functions that need to be implemented, and this technical complexity inevitably brings unseen risks, most typically the fork of The DAO in 2016, which directly led to the creation of ETC. . The potential risks in the technology make institutions choose to be cautious when entering.

Second, Ether’s institutional backers are far from comparable to Bitcoin. Although Ether has a corresponding ETF, it is still a far cry from Bitcoin’s dozen or so ETFs and massive grayscale funds. There are a number of publicly traded companies in the market that hold bitcoin, including some giants like Tesla, while the only ones that hold ethereum publicly are the likes of Meitu. The lack of institutional investors means a lack of financial derivatives. Although the trading volume of Ether contracts surpassed Bitcoin for the first time on May 4, a more meaningful data indicator for the contract is the number of positions. In this regard, total positions in the Ether contract are still only about half of the positions in the Bitcoin contract. In addition, for institutions, most trading is done on compliant exchanges, and on May 4, the volume of bitcoin contracts on the compliant exchange CME was $2.6 billion, compared to $1.1 billion for ethereum, still a large disparity.

In addition, ethereum faces challenges from many public chains. Bitcoin as a means of “store of value”, its status as digital gold and totem of the cryptocurrency market has long been the consensus in the circle. As a decentralized computing system, there are still a lot of challengers to ethereum. From EOS, Cardano, Polkadot to Coinan’s BSC, Firecoin’s HECO and OKEx eco-chain OKChain, all of them have more or less caused some impact to Ether.

In view of the above, the status of ethereum as the world’s premier platform for smart contracts is temporarily not as solid as that of bitcoin as a digital gold, and whether it can really surpass bitcoin still needs to be observed in time.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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