Is the Bitcoin price once more on the rise, prompting the question: should we consider investing in Ethereum instead?
ETH's Time for the Spotlight? An Analysis
Ethereum's Rapid Ascent The digital currency Ethereum has surged an impressive 62% within the past month. After trading around $1,800 from late April to early May, the cryptocurrency reached $2,500 by Friday, May 16. However, it's worth mentioning that this figure is far from its all-time high of $4,600 reached in November 2021. With its extreme volatility, Ethereum has seen lows of $2,200 in 2024 and highs of $4,000. But is this recent surge a sustainable uptrend, or just a rebound following the stock market gains?
Antoine Andreani, Head of Research at XTB France, suggests this rally may be less about Ethereum's fundamentals and more about the broader stock market's impact, which Ethereum has benefited from. On Thursday, May 8, preceding Ethereum's surge, the US and the UK reached a trade agreement - the first significant adjustment to the tariff hikes announced by Donald Trump on April 2. The following day, Bitcoin broke the $100,000 barrier, a level it hadn't achieved since February. Ethereum experienced a 40% growth in just four days.
Ethereum's Reflection of Bitcoin's Strength and More
A reasonable surge, according to Antoine Andreani, as investors, anticipating a stock market rebound following the agreement announcement, first invested heavily in Bitcoin, which has a reputation for rebounding more robustly than stocks, then saw Bitcoin surge, leading them to believe Ethereum would follow suit and generate significant buying pressure. In fact, Bitcoin tends to announce bullish trends before indices like the Nasdaq, as it can be invested in at any time, not just during market hours.
However, Ethereum has more than just Bitcoin's reflection to offer. A significant event occurred on May 7: the successful deployment of the latest Ethereum blockchain update, named Pectra. While this update may have contributed to pushing Ethereum's price up, it does not appear to be the primary reason behind the recent rally. Unlike Bitcoin, Ethereum can also be "staked" by users, generating interests like dividends for stocks. This practice reduces trading and decreases the number of units available on the market, ultimately leading to an increase in the purchase price.
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Ethereum and the Cryptocurrency MarketThe recent rally in Ethereum seems more closely tied to the cryptocurrency market's dynamics and overall trends, such as institutional adoption and regulatory clarity, as well as developments in AI and layer-2 growth[4]. Moreover, shifts in market sentiment, from bearish to bullish, and the fear of missing out (FOMO) among retail investors, have played significant roles in driving the recent surge[3]. However, The Pectra update, while it could have positively impacted Ethereum's price, appears not to be the primary factor contributing to the recent rally.
In essence, Ethereum's surge appears to be driven more by broader cryptocurrency market dynamics, investor sentiment, and the reflection of Bitcoin's strength in the market, rather than any specific update like Pectra or stock market movements.
Investors may have initially invested in Bitcoin due to anticipated stock market rebound following the trade agreement announcement, believing that Bitcoin's rebound would pave the way for Ethereum's growth as well, thereby generating significant buying pressure. Additionally, Ethereum's unique feature of being "staked" by users to yield interests, thereby reducing the number of units available on the market, could also contribute to its increase in purchase price.
