A year later, and we are once again talking about Ethereum’s new highs. But much has changed since then. Last November, the valuation of just above $400 might have been seen as lofty by some, and certainly the jump to the $600 level. Few would have believed that Ethereum will gain close to 1,000% within a few months. And when the “correction” came, courtesy of China’s crypto crackdown, ether soon fell below $2,000. Bearish forecasts were aplenty. Another 2017? Not so much.
The climb back and towards a new high of $4,670 showcases a few things for both Ethereum and the cryptocurrency market, with the first being a kind of reimagining of what bull and bear cycles are. When Ethereum slumped to $1,787 in August, it seemed to have all the markings of the beginning of a bear cycle. But four months removed, it has tripled in price and looks to perhaps be trying to reach the then-lofty five-figure bitcoin valuation from last November.
The relationship between the two top tokens has always been an important one, and bitcoin’s own new ATH of $67,016 on October 20 certainly helped push things forward. But the disconnection between BTC and other cryptocurrencies has been one of the most important developments in the market, and it has allowed each token to go up and down independently. Further, well, bitcoin and ether are just fundamentally different.
Today, bitcoin is a digital inflation hedge. Most people (not counting institutional investors, hedge funds and the like) won’t go out and purchase entire tokens. Most people don’t buy bitcoin with the intent of spending it, or transacting with it, or doing anything other than hodling.
In comparison, Ethereum has formed a parallel cryptocurrency market of its own.
Ethereum’s Walled Crypto Garden
The Ethereum network’s ERC-20 protocol is powering many tantalizing top tokens, including the staple Tether, yield farming and even the peculiar NFT market.
It is also its own bond market, with hundreds of thousands of ETH staked for yields. Inflation has become a thing of the past, since the London hard fork started burning gas fees. Which means that every single time an ERC-20 cryptocurrency gets swept up in a fad (looking at you, SHIB), ETH gets bought and burned.
Ethereum runs the smart contracts that seem to be the future of business blockchain.
We called ETH “digital silver” once before. Today it’s looking a whole lot more like the blockchain equivalent of crude oil, from drilling to the gas pump. So, instead of wondering what’s driving the price up, a better question might be, Why it would go down?
Danny Chong, chief executive officer of decentralized asset tracking platform Tranchess, said as much. He notes that, in the absence of negative news, everyone is expecting another bull run. Or, perhaps more accurately, an additional layer on top of the existing one. Yet cryptocurrencies have shown exceptional resiliency to negative news in recent times. They remain extremely volatile, but the bouncebacks are faster and more pronounced.
Would news of a country cracking down on crypto or nations regulating it truly make a lasting impact, given what we’ve seen so far? Some say they can’t be regulated, and no clampdowns so far have had such an impact. Ethereum’s team has been putting in the work, most recently introducing a burning feature to add deflationary appeal to the token.
Chong compares the risk-on sentiment regarding crypto to that seen in the stock market. Yet while stock valuations are coming under serious question and their companies scrutinized, Ethereum and many other tokens are seen as considerably undervalued given how the crypto market is shaping up. From banks competing with exchanges in order to give clients native crypto wallets to institutions moving in, the market is coming off as well-positioned indeed.
Perhaps the greatest threat Ethereum has to watch out for is tokens like Cardano or Solana looking to take its place. That’ll be tough, because inside its own walled garden, Ethereum has a built-in first-mover advantage.
It’s quite telling that bitcoin is no longer the token that developers are trying to beat.
