Ether’s Market Value Surges $20 Billion In One Day While Bitcoin Prices Slow–Here’s Why
Ether, the world’s second-largest cryptocurrency, is flirting with new highs Tuesday thanks to booming institutional adoption as its larger rival, bitcoin, struggles to pare back massive losses.
As of 4:30 p.m. EST, the price of ether has surged 14% over the past 24 hours, adding $20 billion to its market value (currently $160 billion) and settling at about $1,400 per token after briefly surpassing an all-time high of about $1,433 from January 2018, according to crypto data firm CoinMarketCap.
Over the past week, the cryptocurrency underpinned by the ethereum blockchain network has surged more than 28% while bitcoin prices–still 10% off their peak after crashing last week–edged up just 5%.
That’s outpaced gains among other top tokens, including Ripple’s XRP, litecoin and bitcoin cash, which are up 1%, 14% and 11% in the past week, respectively.
Ether’s surge has been fueled in part by an explosion of decentralized finance (dubbed “DeFi” for short) on the ethereum blockchain, notes MyEtherWallet chief operating officer Brian Norton, pointing to a 20-fold increase in the value of ether tokens used to back such loans–from $1 billion in February to $20.5 billion currently.
“Ethereum has over five times the number of active developers as bitcoin, and is adding developers at a faster clip every day,” adds Norton, noting that an increase in developer activity typically spurs demand for the native token.
“Bitcoin is higher today but completely underperforming its rivals–with ether, litecoin and many others are all surging as crypto investors anticipate a consolidation phase for the world’s largest cryptocurrency,” Oanda Senior Market Analyst Edward Moya said Tuesday, noting that “ballooning defitis” and ongoing inflationary pressures continue to send the broader crypto market higher despite heightened warnings from regulators. “The cryptoverse is growing again, and right now many cryptocurrency traders are diversifying into other coins in fear that bitcoin could see another collapse if $41,500 is not reached sometime soon.”
President-elect Joe Biden’s Treasury Secretary nominee, Janet Yellen, called cryptocurrencies a “particular concern” with regards to “tech terrorist financing” in her Senate confirmation hearing Tuesday morning before issuing a call for increased regulation in the space–something Wall Street observers have noted could tank cryptocurrencies. “I think many are used, at least in a transactions sense, mainly for illicit financing, and I think we really need to examine ways in which we can curtail their use and make sure that anti-money laundering doesn’t occur through those channels,” Yellen, a former Federal Reserve Chair, said Tuesday.
The cryptocurrency market’s massive rally has been fueled in large part by inflation concerns and institutional adoption, but the booming rally came to a sudden halt last Sunday. The total market value of cryptocurrencies tumbled from a high of $1.1 trillion to $900 billion in mere hours after a report by the United Kingdom’s Sunday Times shed light on the enforcement measures banks, including HSBC, are taking to bar transfers from cryptocurrency exchanges in the country. The market value of all tokens currently stands at just over $1 trillion.
“Only once in the past seven years has bitcoin gone up by more than 100% in the fourth quarter and then gone up again in the following quarter,” says William Quigley, a cryptocurrency fund manager and cofounder of Tether, the third most valuable cryptocurrency by market capitalization. “The first quarter has historically been the worst quarter for bitcoin, with it declining in price in five of the last seven years.”