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May 11, 2021

The DFi Labs Wrap

Over the past month, Bitcoin’s dominance in the cryptocurrency market dropped below
50%, which is the first time since January 2018, and the currency experienced a monthly
decline of 1.9%. While Ethereum recorded its highest level ever with a 44.7% gain on Thursday as Bitcoin’s dominance in the cryptocurrency market declined. “Flippening” had re-entered the cryptocurrency talk in recent days – this term refers to the belief that the market capitalization of Ether (ETH-USD) may soon surpass that of Bitcoin (BTC-USD). Ethereum flipping was also discussed in 2017. On June 19, 2017, ETH came close, as you can see below.

In 2017, Ethereum’s popularity increased because it was needed to keep up with the hype of
the time: ICOs.

The chatter came along with a big rally in Ether that took the Ether/Bitcoin ratio to a three-
year high, climbing to 0.052, its highest level since mid-2018.

What is driving the rise of Ethereum?

The first thing to note is that the new Ethereum record came about after the European
Investment Bank announced on Wednesday that it had issued its first-ever digital bond on
the Ethereum blockchain. This has led to speculation that the currency is gaining traction
with traditional financial institutions.

The other factor supporting Ethereum is the prospect of a major upgrade that will move it
away from Bitcoin, theoretically allowing for faster transaction times and reducing the
amount of energy needed to process transactions.

Finally, it should be noted that the recent “hype” in the crypto market, that of NFTs, or non-
fungible tokens, digital assets meant to represent ownership of rare virtual objects such as art and sports memorabilia, helps shed light on ETH, as many NFTs are based on Ethereum.

ETH is one of the most successful altcoins of the moment with a price that has taken more
than 16% in the last 7 days. These results reflect the trend that investors are turning to
altcoins and DeFi is becoming more and more important.

Bitcoin’s main attraction for some buyers is its limited supply and thus its resistance to
inflation. The more investors buy, the more limited the supply becomes, further increasing
the price of Bitcoin. However, a supply shortage could make Ethereum much more
attractive as an inflation hedge.

More and more people are interested in ETH because it’s easier to own a whole ETH than a
whole BTC. And while the price of ETH lags far behind BTC, keep in mind that BTC has had
six more years to develop. Ethereum has a healthy foundation and growing ecosystem,
which should drive the price of ETH up over the long term.

In a note published on April 27, JPMorgan gives three reasons why Ether is outperforming
Bitcoin and states that this trend could continue in the future as competition increases in
the cryptocurrency market. Here are the three reasons Ether has outperformed bitcoin in
recent days, according to JPMorgan :

  1. More resilient liquidity;
  2. Less dependence on derivative markets to transfer and store risk;
  3. A more sustainable underlying demand base.A more sustainable underlying demand base.

It would all really boil down to a question of utility. The main difference between Bitcoin and
Ethereum is the latter’s ability to provide a decentralized payment network, as well as a
perfectly tamper-proof computer code storage service. In terms of long-term technology,
many think that Ether will overtake Bitcoin, because if you look at the developers, all of
them are using Ether now. It has 10 times more monthly active developers than bitcoin.

BTC has rallied impressively over the past week, suggesting that sellers have regained
control after the sell-off which briefly sent the market below $50,000 two weeks ago.
Technical indicators are also bullish. The RSI has created a hidden bullish divergence, which
is a good indicator of a trend continuation. In addition, the Stochastic oscillator has
bounced, which rules out a possible bearish cross. The MACD is losing momentum, but still
rising. As a result, the long-term BTC pattern is expected to remain bullish. If you are unsure
about the continued corporate and enterprise exposure to BTC, take a look at
CryptoQuant’s Coinbase Pro Outflow chart. Approximately 11,800 Bitcoins were withdrawn,
meaning just over $500,000,000 was purchased and sent to (a) private wallet(s).

The price of Ethereum has reached a new high as the market responds to the surge in
demand for digital currencies. ETH reached an all-time high of $3,070, a gain of more than
320% this year and more than 1,400% last year. According to CoinMarketCap figures, the
market cap has also risen to more than $353 billion. Other alts are doing well, but they seem
to be more correlated with BTC. On Friday and Saturday, we saw strong gains, but on
Sunday, we saw some pullbacks.

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