The virtual currency markets have been all over the headlines in the last couple of weeks, with Ethereum making a new all-time high of $417. Meanwhile, Bitcoin is trading at $2,701.43 on Bitfinex, which is up 0.9 percent in the last 24 hours. While there were some ups and downs in the last few months, ETH has been trending up and has been on a steady climb for the past few days. But why is ETH suddenly outperforming BTC?
After a minor pullback over the weekend, Ether is trading at $395 as of this writing.
Investment bank JPMorgan released a report explaining why Ether is outperforming Bitcoin. Citing a number of key reasons, the company concluded that there were signs of stronger liquidity, less reliance on derivatives markets to transfer and store risk, and a stronger underlying demand base – at least for the time being.
JPMorgan says Ether outperforms Bitcoin
On Tuesday, JPMorgan released a report entitled Why is ETH thriving? Analysts at the company’s US fixed income strategy wrote:
In recent days, one of the most interesting developments in the crypto currency markets has been the rise in the price of Ether (ETH) relative to other tokens.
Noting that bitcoin is more of a cryptocurrency than a commodity, JPMorgan explains that ETH is the backbone of the crypto economy and therefore functions more like a medium of exchange. Analysts said at the time: To the extent that owning a stake in this potential activity is more valuable….. ETH is expected to outperform BTC in the long run.
JPMorgan analysts pointed out that the BTC and ETH markets suffered a similar liquidity shock earlier this month, which caused a similar weakening in their potential derivatives market in the days that followed, they noted:
However, the depth of the ETH spot market has recovered more quickly and, if anything, liquidity conditions on some exchanges are better than before the event.
Analysts further explained that high-frequency pricing based on cash/futures has a much lower impact on ETH markets, despite visually similar net liquidations. Moreover, the evidence of open interest also suggests that the other side of these transactions was easier to find.
The report continues: The higher turnover on the public ETH blockchain means that a significantly larger proportion of these tokens can be considered highly liquid, further reducing the impact of term liquidations.
Analysts at JPMorgan detailed the situation: In the case of Ether versus Bitcoin, there are signs of stronger liquidity, less reliance on derivatives markets to transfer and store risk, and a stronger demand base – at least for now.
The report adds: Combined with the continued growth of Defi and other parts of the Ethereum economy, this suggests technical but partially significant bullish tailwinds for Bitcoin. The analysts concluded:
ETH valuations may be less dependent on leverage than BTC valuations, which is a technical but sometimes important tailwind going forward.
Do you agree with JPMorgan’s view that Ether is ahead of Bitcoin? Let us know your comments in the section below.
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