Amidst the consolidation in BTC price action following the number one crypto’s meteoric rise and recent correction, the world’s second largest digital asset is showing relative strength. ETH prices are making a strong run at all time highs, just about touching their early 2018 peak. While BTC crushed that milestone in early December, and then quickly doubled it within a month before the pullback, ETH has had a slightly slower (though still astronomical as measured by any metric other than against BTC) rally.

While most traditional finance traders and investors watch crypto prices denominated in US Dollars, the crypto vs crypto pair of BTC-ETH is an important and active market. Bitcoin’s little brother has a bit of a different story behind it than the original crypto currency, and in many ways is a more versatile asset. The vast majority of new blockchain projects being used for everything from speculative DeFi protocols to innovative industrial and commercial ventures are built on the back of Ethereum. While these use cases have wide ranging purposes and implementations, they do require at least nominal amounts of ETH in order to utilize the wider Ethereum network.

Unlike Bitcoin, ETH has no built in hard cap of total supply. This defined scarcity is one of the characteristics that has driven BTC’s adoption as a store of value and inflation proof asset. However, Eth is much more efficient to transact in, and the demand for ETH to support the development of new projects on the protocol are analogous in many ways to industrial uses of precious metals, which is a demand driver that BTC lacks.

I believe that this week will bring with it some direction in BTC prices after bouncing around under 40k for a while, and I will be watching that market intently as the US comes back to work from the long holiday weekend. But traders would be remiss if they did not take a close look at ETH right now. I think many crypto advocates are looking at their asset allocation across coins, and they might be rebalancing to get their ETH allocation back up to a reasonable target.

 

 

 

CrossTower Inc. provides this content for general information purposes, to better inform you on your digital asset investment journey. We do not provide investment recommendations or provide tax advice. Please consult your investment professional or tax advisor if you require assistance in these areas.

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