The price of Ether (ETH), a native cryptocurrency of the Ethereum blockchain network, has skyrocketed since the beginning of the new year. Much more remarkable, however, is the fact that since January 1, ETH has clearly outperformed the mother of all cryptocurrencies, Bitcoin, with 81% growth.
The Bitcoin price, on the other hand, rose ‘only’ by 26 percent over the same period. Both values are based on the respective trading pair against the US dollar since the beginning of the year. There are three main reasons why Ethereum has outperformed Bitcoin in the past few days.
-
- Ethereum’s accelerated growth;
-
- Optimistic forecasts for the decentralized financial sector (DeFi);
-
- BTC’s current phase of comparatively low volatility.
Today we’re about to have a look at that issue in detail. Let’s get started!
ETH Growth Hasn’t Finished Yet
The price of Ether has risen by an incredible 81% since the beginning of the year. But this is far from over. After all, the Ethereum price is still below the previous all-time high from mid-January 2018. Finally, ETH investors want Ether to catch up with Bitcoin, at least with regard to reaching new all-time highs. Historical data show that in recent years Ether has almost always performed better than Bitcoin at the beginning of the year.
The comparison data based on the historical values of January according to CoinMarketCap for Ethereum and Bitcoin are as follows:
-
- 2018 ETH growth: +36 percent / BTC growth: – 16 percent
-
- 2019 ETH growth: -12 percent / BTC growth: – 5 percent
-
- 2020 ETH growth: +25 percent / BTC growth: +21 percent
With the exception of 2019, Ether far outperformed Bitcoin. In the last bull cycle of 2017/2018, the BTC price even decreased while the Ether price increased.
Stable Bitcoin Price Reduces Volatility
In the past few days, the Bitcoin price has consolidated for the most part. This enabled many altcoins to catch up. In particular, the demand for altcoins with a lower volume and liquidity increased significantly as a result.
The Ethereum price rally coincides with what traders refer to as an ‘Altcoin Season’. This is a phase in which many altcoins rise in price together. Especially when Bitcoin faces small price movements.
This altcoin season occurs when bitcoin fluctuates and investors look for riskier deals. Historically, the alternative cryptocurrency season occurs in the first few months of the year. Altcoins usually face larger price movements because their low liquidity makes them prone to extreme volatility in short periods of time.
For private traders, the high volatility of the altcoin market makes buying Ethereum more attractive than buying Bitcoin, at least in the short term. In the meantime, BTC/USD remains in an uncertain position. Some traders warn that Bitcoin could break out of its trading range instead of increasing to higher price levels. When this happens, altcoins are likely to see greater losses compared to BTC.
Conclusion
Ethereum (ETH) has outperformed Bitcoin for several weeks. On the one hand, this is due to the constant growth of the DeFi sector, which in turn increases the Ether price significantly. On the other hand, ETH is benefiting from Bitcoin’s current consolidation phase and the resulting lower volatility. Investors are therefore increasingly looking for risky and, above all, more volatile options.
As the last bull cycle in 2017/2018 had shown, this significant increase in ETH price won’t last long. Once Bitcoin has consolidated, the rate will continue its further journey to an unknown destination.
Will Ethereum become a better investment than Bitcoin? What do you guys think? Feel free to share your thoughts in the comments. Have a great weekend!
Leave a Reply