Ethereum’s Reaction to Bitcoin’s Rise: Will it Reach New ATHs?
As Bitcoin surges towards its all-time high (ATH) of nearly $70,000, analysts are closely watching Ethereum, the world’s second-largest cryptocurrency, wondering how quickly it will follow suit and break its record ATHs of approximately $5,000 printed in late 2021.
Comparing Ethereum’s Performance
An analyst notes that Ethereum’s current position is different from when Bitcoin last broke above its 2017 highs of $20,000 in December 2020. At that time, Ethereum was trading at $600, which was 57% below its previous ATH of about $1,400.
Now, as Bitcoin approaches its record peak of around $70,000 registered in December 2021, Ethereum is approaching $4,000. However, the difference is that ETH is about 36% shy of its ATH of around $5,000.
The Speed of Ethereum’s Rise
The question on the analyst’s mind is how fast ETH will surpass $5,000 based on historical performance. When Bitcoin broke above $20,000 in late December 2020, it took approximately two months for ETH to exceed $1,400 and reach new highs.
The surge after this breakout lifted ETH to around $5,000, driven mainly by retail activities revolving around decentralized finance (DeFi) and non-fungible token (NFT) minting.
Factors Influencing Ethereum Prices
In addition to market-related factors, hopes for the approval of a spot Ethereum exchange-traded fund (ETF) also contribute to stabilizing Ethereum prices. Asset manager BlackRock has filed with the United States Securities and Exchange Commission (SEC) for a spot Ethereum ETF.
However, the SEC has postponed a ruling on BlackRock’s application, citing concerns about Ethereum’s new proof-of-stake consensus mechanism. The agency worries that staking, a core aspect of proof-of-stake, could create opportunities for manipulation.
Ethereum’s Outlook and Relief from the Community
The SEC’s clear reservation regarding proof-of-stake casts a shadow on Ethereum’s near-term outlook, despite the current price uptick. However, it is worth noting that the Commission rejected approving a spot Bitcoin ETF for approximately ten years before January 2024.
Hot Take: What Does the Future Hold for Ethereum?
As Bitcoin continues to reach new heights, it raises speculation about Ethereum’s potential to break its ATHs. Here are some key takeaways:
ETH’s Proximity to ATH
- Ethereum is currently about 36% below its ATH of around $5,000.
- If historical performance is an indicator, it may take some time for ETH to surpass $5,000 after Bitcoin breaks above $70,000.
Influence of DeFi and NFTs
- The previous surge in ETH prices was driven by retail activities in DeFi and NFTs.
- If these sectors experience another boom, it could potentially accelerate ETH’s rise.
Approval of a Spot Ethereum ETF
- Hopes for the approval of a spot Ethereum ETF contribute to stabilizing ETH prices.
- The SEC has expressed concerns about Ethereum’s proof-of-stake mechanism and its potential for manipulation through staking.
Long-Term Outlook
- Despite the current uncertainties, the rejection of a spot Bitcoin ETF for many years before approval provides some relief to the Ethereum community.
- Investors and analysts will closely monitor regulatory developments and market trends to assess Ethereum’s long-term potential.
As the crypto market continues to evolve, Ethereum’s performance in the coming months will be closely watched. Will it break its ATHs and reach new heights? Only time will tell.
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