Ether, the second-largest cryptocurrency, is facing challenges in keeping up with its dominant counterpart, bitcoin. Despite being a significant player in the $2.7 trillion crypto market, ether's performance trails behind bitcoin's surge.
In the first quarter of this year, ether's value increased by approximately 53%, whereas bitcoin experienced a 65% rise. Ether, currently trading around $3,612, remains at least 26% below its all-time high of $4,867.60 reached in November 2021. Despite a recent technical upgrade aimed at reducing transaction fees on its ecosystem, ether's momentum didn't match the anticipation surrounding bitcoin's upcoming "halving" next month.
Following the blockchain's Dencun upgrade on March 13, ether witnessed a 12% drop, reflecting market sentiment. Joseph Edwards, head of research at London-based Enigma Securities, highlighted ether's struggle with name recognition among non-endemic investors, hindering its potential for rapid growth.
The anticipation for a potential approval of spot ether ETFs by the U.S. Securities and Exchange Commission (SEC) adds another layer of uncertainty. While some, like Standard Chartered Bank, project significant price increases for ether upon ETF approval, others remain cautious due to the regulatory ambiguity surrounding ether's status.
Unlike bitcoin, ether operates on a 'proof-of-stake' blockchain, potentially classifying it as a security, subjecting it to stricter regulations. This complicates the prospects for ETF approval, especially considering the higher yields generated through staking.
Anders Helset, head of research at K33, doubts the SEC's willingness to approve staked ether ETFs, citing the regulatory hurdles. Institutional demand for ether lags behind bitcoin, with digital asset funds experiencing outflows compared to inflows for bitcoin-related products.
Despite these challenges, enthusiasm for ethereum's technology remains strong. BlackRock recently introduced its first tokenized fund on the ethereum blockchain, signaling broader adoption of ethereum in tokenizing real-world assets.
Overall, while ether faces hurdles in catching up with bitcoin's momentum, its underlying technology continues to drive interest in various applications beyond cryptocurrency.