The narrative surrounding Ether (ETH) that it is rapidly morphing into an independent asset has been around for some time now. However, in recent months this idea has gained more and more traction, as evidenced by the fact that, since October 1, ETH has shown a substantial move north against Bitcoin (BTC).
To put things in perspective, in early November, the month-long correlation between the BTC / ETH pair fell to 60%, its lowest level in the coin’s decade of history. Also, since the beginning of the year, while Bitcoin posted gains of 105%, Ether was up an impressive 505%, thus outperforming the flagship cryptocurrency nearly five times.
The fact that Ether is gaining the upper hand is perhaps best reflected in the fact that, over the course of the past two months, the ETH / BTC pair has continued its upward trend, despite a significant market decline in general since the beginning of December. In this regard, even when the value of BTC fell below $ 50,000 again, the price of the ETH / BTC pair continued to accumulate in value, rapidly rising by around 13%, thus reaching a three-year high.
The “flippening” narrative
Speaking to Binance’s research wing, a spokesperson for the cryptocurrency exchange told Cointelegraph that the aforementioned activity – in which ETH has been able to garner a large amount of independent market support against Bitcoin – has been quite unusual considering Note that the ETH / BTC pair tends to rise only during bull runs, adding: “This is not to say that ETH has already decoupled from BTC, but it does provide a clear view that not all altcoins are correlated with BTC movements.” The spokesperson further elaborated:
“It is important to recognize that ETH may no longer be considered an altcoin, but rather is a token with its unique characteristics. The main drivers of the recent rise can be attributed to the growing narratives of the Metaverse, GameFi and NFT, all of which are largely built on measured over the ETH network. “
Although ETH is still far from fully decoupled, The spokesperson stressed that such a vision can no longer be considered just a pipe dream, as the overall narrative is already beginning to change thanks to the emerging new Ethereum use and adoption cases.
Not only that, the analyst also opined that a similar scenario could very well play out for a number of other prominent altcoins as well: “As in traditional equities, there will be no distinction between ‘BTC and alts’, instead the prices of all tokens will be independently driven by systematic and unsystematic risks.”
Igneus Terrenus, head of communications for crypto exchange Bybit, told Cointelegraph that, at the end of the day, the value of a digital asset is determined by its supporters and investors, and with more than six years of development and a plethora of applications from Smart contracts built on top of Ethereum (including those related to fledgling spaces like DeFi and NFT), the premium altcoin has now developed an identity and ecosystem of communities that exist independently of BTC, particularly over the past year. “There will still be overlaps, but now there is enough difference to sustain a divergence in price movement,” Terrenus said, adding:
“As the demographics of the BTC and ETH fields continue to diverge, we will also expect to see their respective price actions gradually unravel further.”
ETH has a unique position in the market
Netta Korin, Co-founder of Orbs, a public blockchain infrastructure, highlighted to Cointelegraph that ETH’s direct northward move from Oct. 1 continues to add fuel to the narrative that Ether could actually move to Bitcoin at some point in the near future. Although the vast majority of other cryptocurrencies continue to show a high degree of correlation with BTC, he said that Ether has clearly proven to be “fuel for DApps”.
Korin added that Ethereum has long surpassed Bitcoin as the most widely used blockchain and, even when it comes to recovery after market cooling periods, it has shown significantly better performance than BTC. Furthermore, he stated that the upcoming Eth2 update “will improve the demand outlook”, adding:
“Ethereum’s new supply and demand mechanics and its position as a leading financial infrastructure and crucial backbone for some of the most popular projects, such as MakerDAO and Uniswap make decoupling from ETH a potential reality.”
Korin also noted that Ethereum is a key player in DeFi and a core platform for the NFT space, which seeks to build financial applications for lending and trading on the blockchain – of which more than 3,600 DApps are currently running on top of the Ethereum ecosystem. . Not only that, Ether could also be a hedge for inflation due to its ties to DeFi and the NFT market, two areas that will grow exponentially in 2021, in his view. “Ether is on track to overtake Bitcoin as the top cryptocurrencies by market capitalization,” concluded.
Could ETH’s continued independence help stimulate BTC?
If the untying of ETH is an imminent reality, will this impact a potential BTC bullish move if the ETH / BTC pair starts to grow? On the matter, a member of Binance’s research wing pointed out to Cointelegraph that if the price differential between the ETH / BTC pair continues to grow on its current trajectory, it would still not be correct to say that the development could lead to a growth momentum. general for BTC, noting:
“Large investors will continue to buy BTC regardless of how bearish it appears on the charts or how other tokens are performing. They do so because BTC remains […] the pioneer in space and the market driver. This is fueled by the narrative that BTC is a digital store of value and a hedge against inflation. “
With that said, the Binance analyst admitted that, when considering the other end of the spectrum, they still expect to see a feeding frenzy among retail and institutional investors, as they rush to increase their exposure in ETH.
Ether’s growing weight in the market has not gone unnoticed by major financial institutions around the world, with US banking giant JPMorgan Chase claiming in a recent report that ETH could be a better bet for investors than BTC, especially tailored that the digital asset market continues to mature and evolve. According to the company’s research analysts, ETH’s five-fold surge compared to BTC over the past year has seen altcoin accumulate a market capitalization that is almost half that of Bitcoin.
Another aspect of ETH that has many investors wide-eyed is the network’s potential to gain a major foothold in the burgeoning Web 3.0 ecosystem, which is extremely popular right now despite its implementation in the The real world is still years away. While no one can be sure how this space will continue to evolve, chances are high that ETH will capture much of the value associated with decentralized Web 3.0 in the future.
Last but not least, it is worth noting that the recently implemented Ethereum network London update – which went live during August 2021 – altered the way the currency’s gas rates are calculated, effectively burning a portion of all ETH-based fees and reducing the altcoin’s total supply pool. As for the numbers, this has resulted in Ether’s annual inflation rate dropping from ~ 4% to ~ 3%.
Not only that, Ether’s ever-evolving monetary policies are also designed to help make the asset deflationary, making it attractive to long-term owners as well as institutional funds. Therefore, it is reasonable that the perception of Ether as a standalone asset will only continue to gain more support.
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