Ether lags behind Bitcoin and Solana in price growth. Experts say this is because of how different cryptocurrencies are. However, a key event is expected to drive up the price of Ether.
For all intents and purposes, it's been a fantastic year for Ethereum.
The explosion of faster Layer 2 networks has reduced fees. The merger, which marked Ethereum's landmark transition from energy-intensive proof-of-work to environmentally friendly proof-of-stake, essentially drove billions into ether staking, known as liquid staking. According to DeFillama, roughly $36 billion worth of Ether is currently stocked through liquid staking protocols. data.
Spot Ether exchange-traded products began trading in July and are open to a new institutional class of investors.
There's just one problem: the price of Ether is still lagging behind.
According to Investment Simulator, both Bitcoin and Solana are up 38% year-to-date, while Ether is up just 15% over the same period. created Finance company by 21 shares. What gives?
Yves Longchamp, managing director and head of research at crypto bank Amina, said NewsBecause Ethereum serves a different purpose than Bitcoin and Solana.
He said that their price performance should be seen individually rather than compared.
Moreover, experts predict that the upcoming Federal Reserve meeting in September could be a catalyst to push Ether higher.
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The main differences
Longchamp said the skyrocketing prices of bitcoin and Solana were bolstered by the launch of spot bitcoin exchange-traded funds and the ongoing memecoin frenzy.
Since launching in January, spot bitcoin ETFs issued by Wall Street heavyweights such as BlackRock and Fidelity have seen more than $20 billion invested. Foreside investors.
Memecoin's activity on Solana in July boosted the 24-hour trading volume on the network to well above the volumes of Ethereum and its Layer 2 network combined.
While Ether has also been able to lead this year's bull market, it is different from its cryptocurrency cousins in many ways, which may explain why it hasn't enjoyed the same dramatic growth.
Crypto digital oil
Bitcoin is often pitched as digital gold, which has yet to be established.
Ether, on the other hand, is like digital oil, says Tal Jackon, CEO and co-founder of crypto data platform Tres Finance.
“The price of Ether is a direct reflection of how expensive it is to use the Ethereum network,” he said. News. “In the future, ether will be like oil prices. It is a utility currency that will underpin the workflows of the financial future.
Transactions on Ethereum are very slow and expensive.
In 2017, network fees skyrocketed after a non-fungible token about cats called CryptoKitties went viral, effectively pricing out all but the richest users.
Not so anymore. On August 11, the average transaction cost on Ethereum reached its lowest level in years Etherscan.
This is partly thanks to the rise of Layer 2 networks that move the majority of transaction activity away from Ethereum.
Longchamp says this is why the price of Ether has dragged. Users need to hold less of the network to interact with it.
“This [layer 2 development] The base takes the pressure off the chain to settle each transaction, resulting in lower network load and lower gas fees,” he told News.
“In summary, the fact that the price of Ethereum is relatively stable shows a positive development at the technical level.”
How does ether grow?
Solo Seesey, CEO of crypto wallet Kalaxi, said increased inflows into spot ether ETFs could hurt the digital asset.
On August 5, when global capital markets crashed, investors poured into spot ether ETFs. Just as they dumped Ethereum, they also dumped their Bitcoin ETF holdings.
Seesey said that if Bitcoin, which is highly correlated with the rest of the market, does well, so will Ether.
Many investors expect Bitcoin to rise whenever the US Federal Reserve lowers interest rates. There are 100% odds of that happening in September FedWatch data.
Changing market sentiment is another tailwind, Jackon said. After all, the majority of decentralized financial activity still exists on Ethereum.
Data from Diphylla This shows that Ethereum accounts for more than half of all DeFi investments.
Liam Kelly is the DeFi Correspondent for DL News. Got a tip? Email at [email protected].