Ether exceeds $4,000 and approaches its all-time high

While bitcoin goes from record to record, the second most capitalized cryptocurrency on the market is approaching its all-time high.

If bitcoin has captured most of the spotlight in recent weeks, with a record to boot, another major cryptocurrency, ether, is also experiencing a meteoric rise and has some of its own assets to go even higher . This Monday, March 11, ether exceeded the symbolic threshold of $4,000, for the first time since November 2021. The crypto is only 18% away from its absolute record at $4,892 according to data from Coinmarketcap.

Launched in 2015, ether (which is based on the Ethereum blockchain) is now, by far, the second digital currency in total value, with a global capitalization of more than $480 billion. Like others like solana or dogecoin, it benefited from the authorization, in the United States, of a new bitcoin investment product, the ETF, in mid-January, explains James Butterfill, of the investment company CoinShares.

These ETFs allow investors to benefit from fluctuations in bitcoin without purchasing it directly and offer them the ability to exit at any time. Their launch led to an influx of new money which allowed bitcoin to set a new record above $71,000 this Monday, March 11.

ETF ether

But at the same time, ether has done better than its big brother, jumping almost 72% since the start of the year compared to only 61% for bitcoin. This outperformance is largely due to “expectations that an Ether ETF could be approved in the United States”, according to Dessislava Aubert, of the analysis firm Kaiko.

Several management companies have therefore requested authorization from the American financial markets regulator, the SEC, to market these Ether investment products. The SEC is bound by a timetable and will have to rule, at the latest, on the first files filed, those of VanEck and Ark 21Shares, on May 23.

“Ether is waking up, because investors are expecting a regulatory green light,” according to Michaël van de Poppe, of MN Trading, for whom “people are in the process of moving from bitcoin to ether, in which they see a return opportunity.”

New update in sight

Beyond the ETF effect, the digital currency imagined by Russian programmer Vitalik Buterin has several cards up its sleeve. For Simon Peters, of the Etoro cryptocurrency exchange platform, ether is also supported by the prospect of “Dencun”, a major update to the technology underlying this digital currency, scheduled for March 13.

This major step should improve transaction processing capabilities and lower their costs, but also unleash the growth of an ecosystem with multiple applications.

“Bitcoin allows you to store value, while ether has much more potential for use,” recalls James Butterfill.

It is in particular the destination of choice for NFTs (non-fungible tokens), the digital certificates of authenticity which caused so much talk three years ago.

The two cryptocurrencies are therefore not in direct competition, according to Michaël van de Poppe, because bitcoin is “pure money” while ether “is an investment in the entire blockchain ecosystem”, the technology on which digital currencies are built on.

An ecosystem that consumes less energy

Ether has the advantage of having already successfully negotiated two major technical transformations in as many years, in particular the transition to a system that consumes less energy, in September 2022.

The mood is “increasingly optimistic” about a “Dencun” which “would pass without incident”, says James Butterfill, reinforcing the credibility of the motto. The analyst also points out that ether, by its very functioning, offers the “additional benefit” of interest generated by its holders.

The mechanism for creating this currency involves immobilizing already existing ether, a method called “Proof of Stake”, which differs from that of bitcoin, which requires very complex calculations (“Proof of Work”). Owners of ether who agree to block all or part of it receive a remuneration of a few percent per year, an income which is added to the potential capital gain in the event of appreciation of this currency.

The so-called “Proof of Stake” process, adopted in September 2022, has very significantly increased the quantity of Ether immobilized, notes Simon Peters, to 21% currently compared to only 10% 18 months ago.

“There is less ether in circulation,” insists the analyst. “And if demand increases” with the arrival of new investors, “given the contraction in supply, prices should rise.”

“Ether will rise more than bitcoin,” predicts Michaël van de Poppe, “and there is even a chance that its total capitalization will eventually exceed that of bitcoin.”