Ether’s price experienced a significant increase of 13.5% between January 10 and January 12, surpassing $2,650 for the first time since May 2022. The main driving force behind this rally was the approval of the spot Bitcoin (BTC) exchange-traded fund, despite the fact that the leading cryptocurrency itself saw a 2% decrease during the same period. Now, investors are questioning whether Ether (ETH) has the capability to maintain its current market capitalization of $322 billion.
Over the past 60 days, the price of Ether has risen by 27%, outperforming Bitcoin’s 24% increase in the same timeframe. This is quite impressive considering that the approval of the spot BTC was expected to significantly boost its price by attracting a new set of clients who were previously unable to acquire cryptocurrency directly. Bloomberg ETF analysts estimate a 70% chance of an Ethereum ETF approval by May, as opposed to a 95% chance for Bitcoin.
BlackRock, Fidelity, Grayscale, VanEck, and other asset managers anticipate the final decision on the spot Ethereum ETF by the U.S. Securities and Exchange Commission to be made by May 23. However, given that Bitcoin has already paved the way, some analysts believe that the answer may come sooner than expected. The SEC has set intermediary deadlines in late January for some of the applicants.
The bullish momentum of Ether cannot solely be attributed to the approval of the Bitcoin ETF. Ethereum’s direct competitors experienced a correction after significant rallies. BNB saw a 2% decline in the seven days leading up to January 12, while SOL dropped 3% during the same period.
In the case of SOL, the bullish momentum faded after the successful SPL token airdrops faced significant price corrections. Additionally, the decentralized applications (DApps) activity seemed to be concentrated on a few projects with imminent token launches, which also lost momentum after the snapshots. As a result, investors’ interest in Solana’s SOL token started to diminish.
BNB experienced an unexpected 35.7% gain between December 17 and 27, 2023, but this bullish momentum was not accompanied by network activity. In fact, in the seven days ending on January 12, BNB Chain’s active DApp addresses decreased by 61%, and the number of transactions dropped by 64%, according to DappRadar. In comparison, Ethereum saw a 2.2% decline in active addresses and a 0.3% decrease in volumes during the same period.
Despite the depressed state of the nonfungible token (NFT) markets compared to their peak in 2021, Ethereum’s network remains the undisputed leader in terms of value, including leading collections such as CryptoPunks, Bored Ape Yacht Club, Pudgy Penguins, and Azuki. Users of Ethereum decentralized finance (DeFi) applications and top NFT assets are not concerned about the average transaction fee of $6.30.
Ether’s price has also benefited from its 4.3% annualized staking reward and a slightly negative issuance rate. Almost 24% of the circulating ETH supply is locked up in the network’s validating process, which increases investors’ expectations for its price. In contrast, Solana’s adjusted staking reward is 0.8% due to its high SOL issuance rate.
The Ethereum network is expected to undergo a hard fork that will bring significant advancements in its technological capabilities. The “Dencun” fork, which focuses on improved data availability and reduced costs for rollup transactions, is scheduled for its first testnet implementation on January 17. Another anticipated improvement is account abstraction, which enables reduced transaction costs and secure social logins.
Ethereum has faced criticism for its limited capacity to scale and implement privacy solutions in the base layer. Therefore, it makes sense to streamline the process of accessing its second layers in terms of user experience and costs. As a result, Ether’s rally above $2,600 is not solely influenced by the spot ETF approval, as the Ethereum network continues to dominate the smart contract industry.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making a decision.