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Ethereum- New Highs In The Second-Leading CryptoAndrew Hecht - Barchart - Sun Nov 7, 8:58AM CST
Ethereum is the second-leading cryptocurrency. As of the end of last week, the tokens were trading at the $4,500 level with an over $530 billion market cap. Ethereum’s value was nearly 20% of the overall asset class’s value.
Ethereum is a decentralized platform that runs smart contracts or applications precisely as programmed without downtime, censorship, fraud, or third-party interference. Ethereum is the protocol. The tokens are called Ether. Ether is used to pay for computation time and transaction fees.
While Bitcoin is the asset class’s “brand,” Ether has been hot on its heels, gaining on Bitcoin in 2021. Bitcoin closed 2020 at $28,986.74 and was trading at the $61,290 level on November 5, a 111.4% gain in 2021. Ethereum closed at $738.91 on December 31, 2020. At $4500 at the end of last week, Ethereum was over six times higher. Investors in Ethereum have done far better than those holding Bitcoin this year.
Ethereum rises to a new high, following Bitcoin
Bitcoin was the first to reach a new all-time high over the past weeks as the price eclipsed the April 2021 high.
The chart highlights Bitcoin’s new peak on October 20. After falling from the nearly $64,800 level in April to a low of below $29,000 in late June, Bitcoin came storming back, reaching new heights, and was over the $61,000 level on November 5.
Ethereum followed a similar but somewhat delayed path. Ethereum reached $4,370.77 on May 12 before correcting to just below the $1710 level in late June when Bitcoin found a bottom. Since then, Ethereum exploded higher, reaching its latest peak on November 3.
BITO was bullish for Bitcoin, but Ethereum has a big following too
Rallies in the cryptocurrency arena that took the prices to new highs have been event-based.
The chart shows that the move to around d the $20,000 level in late 2017 corresponded to the listing of Bitcoin futures on the CME. In April 2021, Coinbase (COIN), a leading cryptocurrency exchange, listed shares on NASDAQ, which propelled Bitcoin and other cryptocurrencies to new highs. The latest high on October 20 came one day after the SEC allowed a listing of the first futures-based Bitcoin ETF product, the ProShares Bitcoin Strategy ETF (BITO). It should come as no surprise that the events that increased the asset class’s addressable market caused prices to rise. The incredible returns from crypto investments have caused a frenzy of speculative interest. At the same time, rising inflation that erodes fiat currency’s purchasing power and high-profile acceptance from the technology sector have created an almost perfect bullish storm for the burgeoning asset class. Technology leaders like Square’s (SQ) Jack Dorsey and Tesla’s (TSLA) Elon Musk have created a buzz of PR around Bitcoin, Ethereum, and a host of other cryptocurrencies. Both companies put their money where their CEO’s mouths were with investments in Bitcoin and other cryptos. New of their purchases also drove prices higher.
Ethereum is a more flexible protocol
While Bitcoin gave birth to blockchain technology or vice versa, the leading crypto token is nothing more than a currency. Ethereum is a ledger technology that companies now use to build new programs. In technology speak, if Bitcoin was the first 1.0 version of the asset class, Ethereum is crypto 2.0, allowing for building decentralized applications that are built on top of the Ethereum platform.
The main advantage of Ethereum over Bitcoin is it allows individuals and companies to do much more than just transfer money between entities. Think of it this way, if Bitcoin is the means of exchange, Ethereum is the financial infrastructure around money.
Ethereum is greener
Elon Musk has had an on-again, off-again relationship with Bitcoin. He reversed course after initially embracing the leading cryptocurrency and announcing that Tesla (TSLA) would accept Bitcoin in payment for its EVs. Mr. Musk cited Bitcoin’s carbon footprint as the reason for his reversal. Since his EV company’s mission is to reduce carbon emissions, it was no surprise that he objected to Bitcoin miners’ activities that were traditional energy-intensive.
Meanwhile, since there are more Ethereum transactions per block, Ethereum has a far lower carbon footprint per transaction than the Bitcoin blockchain. Ethereum creator Vitalik Buterin confirmed that Ethereum would go through a complete overhaul in 2021, reducing energy consumption by almost 99%, making Ethereum 2.0 far more environmentally friendly than Bitcoin. Meanwhile, Ethereum is far from the greenest crypto. The three leading green cryptos these days are Algorand (ALGO), BitGreen (BITG), and Cardano (ADA).
Ethereum lots set to continue to soar, but it will be a bumpy ride
Cryptocurrency investing and trading is not for the faint of heart. The asset class faces more than a few challenges, including the government’s concerns over “protecting the public.” Moreover, controlling the money supply is likely a more significant concern compared to the regulatory issues that center around custody, security, and the potential for manipulation.
As of the end of last week, over 13,600 cryptocurrencies were floating around in cyberspace. Ethereum remains firmly in second place. While Ethereum’s market cap is under half Bitcoin’s, it is nearly six times the level of the third leading cryptocurrency, Binance Coin (BNB). Only Bitcoin and Ethereum have market caps over the $100 billion level as of November 5.
Ethereum’s protocol and move to a 2.0 version that addresses the environment should continue to help the second-leading cryptocurrency gain on Bitcoin, the first.
Bitcoin reached a record peak at $66,923.57 on October 20 and pulled back from the high. Ethereum followed with new highs at the $4,663 62 level on November 3. While the two leading cryptocurrencies have provided fantastic gains in 2021, Ether tokens have been a far better investment.