Ether has hugely outperformed bitcoin since the two cryptocurrencies bottomed in June 2022. Ether’s higher gains came as investors anticipate a major upgrade to the Ethereum blockchain called “the merger.”
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Bitcoin hit a low of $17,601 on June 19 and has since risen around 31% during Friday’s trading, according to data from CoinDesk.
Ether also hit its recent low on June 19 at $880.93, but has surged 106% since then.
The huge performance discrepancy between the two cryptocurrencies comes down to one major factor: a big Ethereum blockchain upgrade. Ether is the native cryptocurrency of the Ethereum network.
Ethereum’s upgrade, dubbed “merger,” is set to take place on September 15 after numerous delays. The blockchain will move from a so-called proof-of-work system to a model called proof-of-stake. A full explanation of the merger can be found here.
Proponents claim that this move will make the Ethereum network faster and more energy efficient.
“The upcoming Ethereum meltdown is the biggest story in crypto right now and explains why Ether has left Bitcoin in its wake over the past month,” Antoni Trenchev, co-founder of crypto trading platform Nexo, told CNBC via email.
“A blockchain that advertises itself as energy-efficient will always capture the imagination of the masses and that’s why Ether is riding high ahead of the merger, a move to proof-of-stake.”
But Ether’s recent rally, which saw its price double in the space of two months, was quick.
One analyst said the rally may continue, but there may be some resistance around the $2,000 mark. Ether was trading at $1,814 on Friday.
Jacob Joseph, research analyst at data service CryptoCompare, said that with no Federal Open Market Committee meeting scheduled for August and stocks rebounding, “it is reasonable to believe that Ethereum can still rally then that we are getting closer to merging”.
“However… $2,000 turned out to be a major resistance for Ether and the asset needs more wind behind its sail to break this level.”
Joseph added that bitcoin is unlikely to outperform ether in the near term.
There are risks to rising ether prices, according to Trenchev.
“Any further (unlikely) delays to the mid-September merge will unravel much of Ether’s 50% rally since mid-July,” he said.
There is always the possibility that traders will also take profits on the huge rally, Trenchev said.
“The merger, if successful, could well turn out to be a ‘buy the rumour, sell the news’ event, given the jaw-dropping gains we’ve seen in Ether,” Trenchev added.
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