ETHBTC may surrender. Will these factors support Ethereum?
Despite ETHBTC’s downward trend compared to Bitcoin (BTC), the second most valuable cryptocurrency is likely to recover in the coming months. Crypto analyst Mckenna uses X to support Ethereum (ETH). said A favorable combination of protocol-related and regulatory factors could support ETH, stopping the hemorrhage against BTC and sparking a refreshing rally.
Ethereum underperforms Bitcoin: Will this continue?
Looking at the ETHBTC weekly chart, it is clear that Bitcoin bulls have been dominating since August 2022. During this period, Bitcoin is up 42% against ETH and the bullish trend has been strong.
For example, Bitcoin is at a 2022 low versus ETH, and gains are likely to increase once a spot Bitcoin ETF receives approval from the U.S. Securities and Exchange Commission (SEC). The cryptocurrency community hopes that this approval will solidify Bitcoin’s position and perhaps attract billions of dollars in capital.
Some analysts argue that this event could support altcoins, including Ethereum. So far, Ethereum is lower compared to Bitcoin, but has a firm stance against USD. McKenna also points out that once a spot Bitcoin ETF launches in the U.S., attention will shift to the SEC on whether to approve similar products as well.
These 2 factors can support ETH
Despite ETH’s weakness compared to BTC, Mckenna expects Ethereum to recover in the medium to long term. This is because the Proof-of-Stake (PoS) consensus system is expected to be preferred over the Proof-of-Work (PoW) method that powers Bitcoin.
PoW is a computationally intensive process that uses a lot of energy to confirm blocks. This has drawn criticism from those concerned about the environmental impact of cryptocurrency mining. For this reason, Ethereum has adopted a PoS system that will fully transition in 2021 after the Merge.
In addition to energy efficiency, the analyst notes that Ethereum’s PoS offers ETH stakers a fundamental yield that would make it “the safest bond vehicle in the entire digital asset space.” As a result, this could support ETH and many see it as a safe haven. This confidence is largely based on the fact that Ethereum is the second most valuable cryptocurrency network, with a market capitalization of over $276 billion. CoinMarketCap.
Additionally, ETH will experience deflation in the long term following the activation of EIP-1559 in August 2021. This system burns a portion of the gas fee (base fee), removing a portion of ETH from circulation. According to Ultra Sound MoneyIn the past week alone, over 17,600 ETH has been destroyed, which is 1,000 ETH more than the network issue in question.
Featured image from Canva, chart from TradingView
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