Many elements (price, dominance …) reveal an increase in the power of the ether. From there to catch up with bitcoin? BFM Crypto takes stock.
In the cryptocurrency ecosystem, some users believe in only one cryptocurrency. They are “maximalists” and there are as many of them as there are cryptocurrencies. These people believe that their cryptocurrency will only increase in strength in the coming months and years. Despite the cryptocurrency slump in recent months, those who hold the ether are confident.
In the current context of a short-term rebound in cryptocurrencies, the ether is coming back stronger than bitcoin. According to data from Coinmarketcap, the price of bitcoin has risen 3.8% over the past week, trading Thursday night around 10:40 pm around $ 24,090. For its part, the ether gained over 11% in a week, trading at over $ 1770. This progression can be explained in several ways, both by the very functioning of the Ethereum blockchain which allows access to many applications ( NFT, DeFi, gaming, etc.). There is also the Merge event (see our article here to understand everything about this event), which consists of the Ethereum blockchain that goes from the “proof of work” operation to the “proof of stake” operation scheduled for 19 September. .
“It is possible to recover the historical trend of ether on bitcoin in the long term”
Do these good figures suggest that the ether might someday overtake cryptocurrency queen, bitcoin?
“What seems certain is that ether is growing more as a percentage of the price than bitcoin in bull races. The term is possible. But what we also observe is that bitcoin remains a store of value, which means that in the market. bearish people are taking refuge more in bitcoin and not in ether., it will take many bullish runs before we see ether catch up with bitcoin, “Zonebourse analyst Laurent Pignot told BFM Crypto.
Despite these figures, the price of ether has remained volatile since its inception in 2015. Below $ 1 during its launch year, the cryptocurrency first peaked in June 2016, trading at $ 15 before falling back. . Its introduction on various trading platforms and cryptocurrency exchanges allows ether to gain momentum, the latter amounting to $ 800 at the end of 2017. But it is mostly applications that gained momentum in 2020, including decentralized finance (DeFi) and the launch of Ethereum 2.0 that allowed the cryptocurrency to gain popularity, before hitting a high of $ 4870 in November 2021. , the ether has lost more than 64% of its value with the two recent bear markets.
For its part, bitcoin has also seen a dramatic increase since its creation in 2009 until today. It has only been two years since its creation that the cryptocurrency began to be traded for a few dollars, before flying around $ 1,000 in 2014. But it is especially in 2017 that bitcoin has had a dizzying momentum reaching $ 19,000, driven by numerous cryptocurrency fundraising (ICO). Since 2019, institutional investors have started to enter the market, also pushing up the price of the cryptocurrency which reached its highest level at $ 69,000 in November 2021. Along with the ether, bitcoin has lost more than 65% of its value since its historical peak.
The dominance of the ether increases, the dominance of bitcoin decreases
Another factor is also to be taken into consideration to understand the trajectory of these cryptocurrencies. We need to look at their “dominance”, that is their weight in relation to the total capitalization of the cryptocurrency market, today of 1056 billion dollars. To date, bitcoin is the first cryptocurrency in terms of capitalization, with 440 billion dollars at the counter and ether is in second place, with 199 billion dollars of capitalization.
However, according to a chart published by the “ultra sound money” account, the dominance of bitcoin has been in a downtrend for more than 10 years while that of the ether has been on an upward trajectory for 7 years.
According to Tradingview data, bitcoin’s dominance fell from 95% in March 2017 to 58% in August 2017, before fluctuating in subsequent years. Bitcoin’s dominance has declined since the last cryptocurrency crash in June, dropping from 48% to 42% within a month. For its part, the dominance of the ether has gone from 7% in December 2019 to almost 20% this month, increasing by 2 points in a month.
“Bitcoin has lost its dominance over other cryptocurrencies including Ether which today accounts for nearly 20% of market capitalization. Many players are hoping that Ethereum will become the blockchain in which all applications will be built,” emphasizes Laurent Pignot.
However, it is difficult to predict that the ether will overtake bitcoin in terms of dominance for the latter.
“If we look at historical data, the ether is taking up more and more space in the market and bitcoin is losing it, but no indicator so far can say that the ether will overtake bitcoin,” he adds. .
The Merge: what impact on the ether?
Furthermore, the rarity of a cryptocurrency is also its strong point. This is one of the factors that explains the popularity of bitcoin whose circulation is limited to 21 million units – more than 19 million are already in circulation to date. For its part, the number of ethers in circulation is unlimited – to date there are 120 million ethers in circulation – but the situation could perhaps change.
For now, the ether is an inflationary cryptocurrency, meaning it is created in unlimited numbers. But it could become deflationary in the future, meaning it could face more symbolic destruction than creation. Specifically, when a miner on the Ethereum blockchain validates a block, he receives ether. But since the 2021 EIP-1559 Ethereum blockchain update, up to 75% of the commissions paid to miners are destroyed by “burning” the ether, which can lead to some deflationary periods on the ether.
If The Merge event, whose goal is to lower so-called “gas” (in ether) transaction fees, will allow ether to become more deflationary and therefore rare?
“After The Merge, the goal is for there to be fewer user fees. But if the current destructions are related to transaction fees and should decrease with The Merge, then we still don’t know how the ethers will be destroyed. We are not immune. from new updates on the subject “, underlines Laurent Pignot.
Also, what could be the impact on the price of The Merge’s ether? At this stage, many investors are already aware of this future transition and already hold this cryptocurrency.
“Since many investors have already entered Ethereum, we will not expect an ether price exposure. On the other hand, in the darker scenario, if The Merge goes wrong, investors will exit this market on the assumption that the ‘ether breaks down and does not work as expected in the next few weeks, ”emphasizes Laurent Pignot.
One of The Merge’s goals is also to improve ether’s number of transactions per second. Ethereum boss Vitalik Buterin recently told the Ethereum Community Conference (EthCC) that he expects the Ethereum blockchain to reach 100,000 transactions per second, up from just over 15 today. A point that should have an impact on the price of the cryptocurrency.