Ethereum is Outperforming Bitcoin on Several Fronts

2021 started well, however, after a great start, Bitcoin prices dropped considerably before they bounced back to a “moderate” state. The second-largest crypto, Ethereum, also saw sharp falls coupled with significant spikes since early in the year.

There is no denying that both Bitcoin and Ethereum are facing significant volatility and uncertainty.

Bitcoin Down by One-third

In April, the price of Bitcoin soared to almost $65,000. Since then, the leading crypto has lost a third of its value. It took Ethereum a little longer to crash, but by mid-May, the price dropped by 50 percent. So far this year, both Bitcoin and Etherum have seen significant price declines. The only thing keeping them ticking along is hope on the part of investors that, as drastic price falls before, this recent fall could be a harbinger of far better things to come.

Although the market for digital currency is somewhat difficult to trend, many digital currencies tend to follow the “ups and downs” of Bitcoin. This has changed considerably over since the beginning of the year, with the previous trend being diluted. The pattern that is emerging is helping to establish healthy stability for Ethereum, the second most traded cryptocurrency.

Following its launch on an exchange in Canada, Ethereum ETFs have outperformed Bitcoin.

Bitcoin serves as an investment and as a cryptocurrency asset. Ethereum is different, it acts as a platform for non-fungible tokens as well as financial services.

The Current Market Trend

Ethereum recently rallied, going above $2,550 USD, outpacing the market stance of Bitcoin. Ethereum breached the resistance level of  $2,500 USD as well as $2,250 USD, trading at $2,700 USD in July. It has since been facing a downward correction in price.

During the recent increase in price levels, Ethereum consolidated close to $2,508 USD. Ethereum is also testing the Fib retrenchment level of 23.6 percent of the decline from a high of $2,700 USD to slightly over $2,500 USD.

The recent trend indicates Ethereum forming resistance near $2,630 USD. A clear and defined break would tend to support the consensus that the digital currency may reach new highs, marking record price spikes.

Reasons for Outperforming Bitcoin

Ethereum and Bitcoin are different crypto’s and they work at different paces. In many cases, Bitcoin is seen as a store of value, something that can compete with other pricy commodities such as gold and other precious metals.

On the other hand, Etherum is seen by many as the spine, or backbone, of the crypto market, serving as a major medium of exchange. That too, however, has its downside. Compared to Bitcoin, a larger proportion of Etherum tokens face severe volatility.

The crypto industry and the markets served were hit hard by a liquidity shock, one that started in the derivatives market. Digital currencies managed to get through the crisis, however, Bitcoin was affected more than most. On the other hand, Ethereum stood strong, hanging on while Bitcoin slipped.

The on-screen liquidity of Bitcoin is high. This is due in part to the fact that investors in the crypto who do invest when it is spiking, often pull out when they see even small declines in the market. It is this action that sends shocks that reverberate throughout the crypto industry.

However, Ethereum is not always a component of the risks. Ethereum is not reliant on derivatives markets, it is seen as a stable investment. As well, Ethereum sees considerably more transactions consummated on the public blockchain than does Bitcoin. The development team of Ethereum has made a considerable contribution to pushing barriers to allow for smart contracts.

The Constant Fall of Bitcoin

A primary reason why investors are looking over Bitcoin is its unstable presence in the market. Although Satoshi Nakamoto hoped that leaving behind the whitepaper on Bitcoin would change the way money is stored, the digital realm continues to evolve with the trends requiring continued advancements as more and more digitization is added.

Bitcoin miners have had to pay a steep price due to its cost of mining and the ever-increasing restrictions being placed on it by governments. The mining process opposes the ongoing discussions by world leaders on the climate accord.

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Author: Jason Donaldson