Ethereum Gains Outpace Bitcoin And Tests All-Time-Highs Above $1,430

Bitcoin has been held below record highs this week, but the baton has been taken up by Ethereum which has spiked to a fresh record high on Tuesday with a peak near $1,440 before a slight correction.

Liquidity and debasement fears surrounding traditional currencies will continue to drive investor interest, but market volatility will remain extremely high in the short term.

Ethereum surge continues, 100% gain in 23 days

Attention in the cryptocurrencies often focus on bitcoin, but the moves in the biggest coin have been overshadowed over the past few days by Ethereum (Ether) which is the second-ranked asset.

Ethereum closed at $737 at the end of 2020 and has doubled since December 27th with a surge to record highs ahead of Tuesday’s New York open. The overall Ether valuation has also jumped to over $150bn.

Above: ET/USD chart

A firmer dollar provided only a temporary headwind to Ether and the US currency has post ground on Tuesday with the euro-to-dollar rate trading above 1.2100.

Ethereum increases market share

There are significant differences between the two assets. eToro cryptocurrency analyst Simon Peters noted; Bitcoin has a single goal: To become a global decentralised digital currency’ that can be used as a form of payment in shops and accepted by businesses.”

In contrast, Ethereum is a decentralised computer platform. Peters added “Ether is the technology’s actual currency and can be purchased through both centralised and decentralised exchanges, or digital wallets.”

The Ethereum 2.0 platform was launched in December which increased potential transactions and made the coin more attractive to investors, although transaction costs are still relatively high.

Messari researcher Ryan Watkins commented; “Ethereum’s daily transaction volume is going parabolic. It now settles $12 billion in transactions daily, $3 billion more than Bitcoin.

Grayscale, the world’s largest crypto asset manager built a substantial position during 2020 and latest filings indicate a position of 2.9 million. Increased institutional involvement has also increased wider interest and retail buying has surged.

ECB targets bitcoin regulation

The subject of cryptocurrency regulation has been an important focus within global central banks. ECB President Lagarde weighed in with comments last week;

“There has to be a regulation. This has to be enforced and agreed upon … on a global level because if there is a leak, that leak will be used. She added; “bitcoin is a highly speculative asset, which has conducted some funny business and some interesting and totally reprehensible money laundering activity.”

If bitcoin attracts increased regulation, investors are liable to switch to alternative assets.

Liquidity also drives rapid price gains

Cryptocurrencies overall have continued to derive support from expectations of extremely loose monetary and fiscal policies by the Federal Reserve and global central banks. There are also medium-term concerns over currency debasement amid the surge in debt issuance.

DailyFX analyst Daniel Moss noted; “The provision of extraordinary fiscal and monetary stimulus measures, in response to the Covid-19 pandemic, has also underpinned ethereum and bitcoin prices since their March 2020 lows.”