LONDON – Ether hit an all-time high on Thursday as bitcoin’s dominance in the cryptocurrency market waned.
The world’s second largest digital currency by market value hit a new record high of $ 2,800 on Thursday morning, according to data from Coin Metrics. Bitcoin, the first digital coin, was slightly lower at $ 54,471.
The move comes after the European Investment Bank announced on Wednesday that it had issued its very first digital bond on the Ethereum blockchain, Ether’s underlying network. This has led to speculation that the currency is gaining ground among traditional financial institutions.
Most of the major cryptocurrencies were trading higher on Thursday, boosted by the rise in the ether. Bitcoin, the most valuable digital coin, is down about 16% from its all-time high of nearly $ 65,000 earlier this month. It has nonetheless had a breathtaking rally, climbing nearly 90% so far this year, thanks to increased interest from institutional investors and buyers from companies like Tesla.
At the same time, some investors have warned of the foam in the crypto market. Memes-inspired digital token Dogecoin rallied on Wednesday after supporting tweets from celebrities like Elon Musk and Mark Cuban.
And many other “altcoins”, or alternative currencies, have also rallied this year. This led to Bitcoin’s dominance of the crypto market below 50% last week for the first time since August 2018, according to CoinMarketCap.
The first time bitcoin’s market share fell below this level was in 2017, before a huge drop in the price of crypto now referred to as the ‘crypto winter’. But Bitcoin bulls are arguing that things are different this time around, as the rally is driven by institutional demand rather than retail investors.
“There is so much hype from the institutions that are coming in,” Carol Alexander, a professor at the University of Sussex Business School, told CNBC last week. “Bitcoin is almost like a sorting benchmark, the cash in crypto. I think there will be sustained demand as institutional investors gain more confidence in the market. “
“That said, on the more retail side that was in bitcoin, it’s not cool anymore,” Alexander added. “Everyone knows bitcoin and we want things to talk about it. We don’t want to talk about Covid all the time. Much of this is about market psychology. We were locked inside and had no news to tell.
Cryptocurrency skeptics say bitcoin and other digital coins are a speculative bubble. Stephen Isaacs, chairman of the investment committee at financial consultants Alvine Capital, told CNBC earlier this month he believed bitcoin was in a “bubble” that would burst, citing the risks of regulation and to climate change.
Ethereum vs. Bitcoin
Ethereum may be coming after bitcoin, but there are key differences between the two. On the one hand, Ethereum has several software developers who create applications on its network. Ether is the native token of the Ethereum blockchain.
NFTs, or non-fungible tokens, are a popular trend in the so-called decentralized application space, digital assets meant to represent the ownership of rare virtual items such as art and sports memorabilia. Many NFTs are based on Ethereum.
Ethereum is also undergoing a major upgrade that will push it further from bitcoin, in theory allowing faster transaction times and reducing the amount of power required to process transactions. Both the Bitcoin and Ether networks have drawn criticism from environmentalists regarding the impact of crypto mining on the climate.
“After the network upgrade, Ethereum in particular is proving its use case, and with developers crammed into the platform, it’s no wonder it’s gaining so much traction with investors.” said Simon Peters, crypto-asset analyst for online trading platform eToro.
“Underlying is demand from institutional investors. While they may now have some exposure to bitcoin, institutions are now diversifying their exposure and Ethereum is the next natural choice, leaving the second largest crypto-asset in terms of market capitalization well positioned to benefit more.