The crypto market generally tends to follow bitcoin, however, over the past few sessions ethereum has taken a big lead in terms of returns over the world’s biggest cryptocurrency, bitcoin.
Over the past seven sessions, ethereum has delivered a return of 5.5% against -12.4% return given by bitcoin. As of 6.50pm IST on Thursday, bitcoin was trading 1% lower at $54,914.92, while the world’s second-biggest crypto asset was more than 9% higher at $2,593.87, a fresh lifetime high.
According to experts, there are multiple factors working in favor of the altcoin. Altcoin is a cumulative term to define cryptocurrencies that came after bitcoin.
“The recent price movement of bitcoin indicates consolidation. This is a healthy pullback and will provide long-term stability to the world’s largest crypto asset. Ether is rallying because of the launch of ethereum exchange-traded fund (ETF) on a Canadian exchange, which is seen as a major step towards making digital assets, mainstream. Ether is expected to break above $3,000 this month,” said Shivam Thakral, CEO, BuyUcoin.
Moreover, technical factors are also not working in favor of bitcoin, which has a market capitalization of over $1 trillion.
Recently, bitcoin closed below its 50-Day simple moving average (SMA) for the first time since 8 October 2020. According to global cryptocurrency exchange, Kraken, the move lower coupled with bitcoin’s inability to immediately get back over the 50-day SMA suggests that the bears could be taking control of the market in the short term.
Until it closes above the 50-day SMA, one can expect bitcoin to remain rangebound between $51.000 and $58,000 — historical relevant support and resistance levels, respectively, Kraken said in a note.
According to experts, this divergence between ether and bitcoin over the last few days has both short-term and long-term forces behind it. “Over the past year, a lot of investors who got into bitcoin have become aware of ethereum and started diversifying their crypto portfolios. That’s why you’ve seen ether in a general strong uptrend since early 2020. That trend has gotten stronger as the news of Eth 2.0 has become better known. That innovation is going to lower fees and open up many new opportunities for innovation,” said Vikram Rangala, chief operating officer of ZebPay.
While bitcoin’s most well-known use case is as a store of value, ethereum has several use cases. It’s a software platform for things like non-fungible tokens and financial services, among others.
“Investors are learning that. In March, with the Coinbase IPO and other bullish bitcoin news, some investors may have sold their ether to move into bitcoin. Now that this bitcoin rally seems to be ending, people are taking profits and moving value back into their long-term ether investments,” Rangala added.