The ether of digital currency hits a record high and is stealing the limelight from Bitcoin
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LONDON – Ether hit an all-time high on Thursday as Bitcoin’s dominance in the cryptocurrency market declined.
The world’s second largest digital currency by market value rose to a new record high of $ 2,774 on Thursday morning, according to Coin Metrics. Bitcoin, the best digital coin, was a bit lower at $ 54,471.
The move comes after the European Investment Bank announced on Wednesday that it had issued its first digital bond on the Ethereum blockchain, Ether’s underlying network. This sparked speculation that the currency was gaining prominence among incumbent financial institutions.
Most major cryptocurrencies traded higher on Thursday, aided by the rise in the ether. Bitcoin, the most valuable digital coin, is down about 16% from its all-time high of nearly $ 65,000 earlier this month. However, due to increased interest from institutional investors and corporate buyers like Tesla, the company has still seen an impressive rally this year, up nearly 90% so far.
At the same time, some investors have warned about foam in the crypto market. Dogecoin, a meme-inspired digital token, rallied on Wednesday after supportive tweets from celebrities like Elon Musk and Mark Cuban.
And many other “altcoins” or alternative currencies have also rallied this year. This caused Bitcoin’s dominance in the crypto market to fall below 50% for the first time since August 2018, according to CoinMarketCap.
Bitcoin’s market share fell below this level for the first time in 2017 before crypto prices, now known as “crypto winter”, plummeted. Bitcoin bulls, however, argue that things are different this time around, as the rally is being driven by institutional demand rather than retail investors.
“There’s just so much hype from the institutions that are coming in,” Carol Alexander, a professor at the University of Sussex Business School, told CNBC last week. “Bitcoin is almost like a reference point for crypto. I think there will be continued demand as institutional investors become more confident in the market.”
“However, on the retail side that used to be Bitcoin, it’s no longer cool,” added Alexander. “Everyone knows about Bitcoin and we want things to be talked about. We don’t want to talk about Covid all the time. So much of this revolves around market psychology. We got trapped and had no news to discuss about.”
Cryptocurrency skeptics say Bitcoin and other digital coins are a speculative bubble. Stephen Isaacs, chairman of the investment committee of financial advisor Alvine Capital, told CNBC earlier this month that he thought Bitcoin was in a “bubble” about to burst, citing risks related to regulation and climate change.
Ethereum versus Bitcoin
Ethereum may come after Bitcoin, but there are some key differences between the two. For one, Ethereum has several software developers who create apps on its network. Ether is the native token of the Ethereum blockchain.
A popular trend in the so-called “decentralized app” space are NFTs or non-fungible tokens, digital assets that are supposed to represent the possession of rare virtual objects such as art and sports memorabilia. Many NFTs are based on Ethereum.
Ethereum is currently undergoing a major upgrade that will move it further from Bitcoin, theoretically allowing for faster transaction times, and reducing the power consumption required to process transactions. Both the Bitcoin and Ether networks have been criticized by environmentalists for the effects of crypto mining on the climate.
“After the network upgrade, Ethereum in particular is proving its use case, and with developers focusing on the platform, it’s no wonder it’s getting so popular with investors,” said Simon Peters, Cryptoasset analyst for online trading platform eToro.
“That is based on demand from institutional investors. While they may now have some exposure to Bitcoin, institutions are diversifying their exposure now and Ethereum is the natural next choice and the second largest crypto asset by market cap is well positioned to continue profiting. “