3 reasons why Ethereum is unlikely to flip Bitcoin in the short term


After rising 13% in two days, Bitcoin (Bitcoin) The market value exceeds 800 billion US dollars, reaching the highest value in 79 days. In the same time period, Ethereum (ETH) gained 45% in two weeks, bringing the market value of the network to 340 billion U.S. dollars.

Positive expectations London’s hard fork and its potential deflationary effects It undoubtedly worked, but some investors continue to question how the valuation of Ethereum compares to Bitcoin.Some, including Dan Morehead, CEO of Pantera Capital, expect Ethereum surpasses Bitcoin As the largest cryptocurrency.

Market participants may also be excited after Minneapolis Federal Reserve Bank President Neil Kashkari hinted that the Fed may stick to the asset purchase plan for a longer period of time. The reason cited is the spread of Delta variants and its potential harm to the labor market.

Kashkari Say:

“Delta Air Lines may prevent people from returning to work that requires face-to-face interaction and prevent children from going to school.”

Extending stimulus measures will increase the risk of inflation, thereby increasing the attractiveness of scarce assets such as real estate, commodities, stocks and cryptocurrencies. However, the impact of these macroeconomic changes should also affect Bitcoin and Ethereum.

Active addresses give Bitcoin a clear lead

Comparing some indicators of Ethereum can reveal whether the 58% discount of Ethereum is reasonable. The first step should be to measure the number of active addresses, not including low numbers.

Addresses with a balance of $1,000 or higher. Source: CoinMetrics

As shown above, Bitcoin has 6 million addresses worth $1,000 or higher, and 3.67 million addresses have been created since 2020. At the same time, Ether has 2.7 million addresses worth $1,000, less than half. The growth of altcoins has also been slower, with 2.4 million created since 2020.

This indicator of Ethereum is 55% lower, which confirms the gap in market value. However, this analysis does not include how much major clients have invested. Although there is no good way to estimate this number, measuring cryptocurrency exchange trading products may be a good proxy.

Ether lags behind exchange-traded products

Publicly traded encrypted products. Source: Bloomberg and Investing.com

After aggregating data from multiple exchange trading instruments, the results are convincing. Bitcoin dominates with $32.3 billion in assets under management, while Ethereum is at $11.7 billion. Grayscale GBTC plays a crucial role in this difference, as its products were launched in September 2013.

At the same time, Ether’s first exchange-traded product appeared in October 2017, when XBT provider Ether Tracker is launched. This discrepancy partly explains why the total amount of Ether is 64% lower than that of Bitcoin.

Open futures contracts prove that the price gap is reasonable

Finally, the futures market data should be compared. Open interest is the best indicator to measure the actual position of professional investors, because it measures the total number of contracts of market participants.

Investors could have bought US$50 million worth of futures and sold the entire position a few days later. This $100 million transaction volume does not currently represent any market risk; therefore, it should be ignored.

Bitcoin futures aggregates open positions. Source: Bybt

Open interest in Bitcoin futures is currently at 14.2 billion U.S. dollars, lower than the peak of 27.7 billion U.S. dollars on April 13. Binance Exchange leads with US$3.4 billion, followed by FTX, with another US$2.3 billion.

Ether futures accumulated open positions. Source: Bybt

On the other hand, the open interest of Ethereum futures reached a peak of US$10.8 billion in about a month, and the current indicator is US$7.6 billion. Therefore, it is 46% lower than Bitcoin, which further explains the valuation discount.

related: The market value of Ethereum reaches 337 billion US dollars, surpassing Nestlé, Procter & Gamble and Roche

Other indicators such as on-chain data and miner income show a more balanced situation, but the two cryptocurrencies have different use cases. For example, 54% of the Bitcoin supply remained unchanged for more than a year.

The fact is that any indicator has disadvantages, and there is no clear valuation indicator to determine whether a cryptocurrency is higher or lower than its fair value. However, the three indicators analyzed indicate that the rise of Ether will not quickly indicate a “rollover” when priced in Bitcoin.

The views and opinions expressed here only represent author It does not necessarily reflect the views of Cointelegraph. Every investment and transaction involves risks. When making a decision, you should conduct your own research.