Ether has outperformed Bitcoin tremendously since both cryptocurrencies bottomed in June 2022. Ether’s stellar gains come as investors anticipate a major upgrade to the Ethereum blockchain called “The Merge.”
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Since finding a bottom in mid-June, Ether has massively outperformed Bitcoin as investors anticipate a significant upgrade to the Ethereum blockchain.
Bitcoin hit a low of $17,601 on June 19 and has since risen around 31% at Friday’s trading price, according to CoinDesk data.
Ether also hit its recent low of $880.93 on June 19, but has since surged 106%.
The huge discrepancy in performance between the two cryptocurrencies is due to one main factor: a major upgrade on the Ethereum blockchain. Ether is the native cryptocurrency of the Ethereum network.
Ethereum’s upgrade, dubbed “Merge,” is set to take place on September 15 after numerous delays. The blockchain will change from a so-called proof-of-work system to a model called proof-of-stake. A full explanation of the merger can be found here.
Proponents say the move will make the Ethereum network faster and more energy efficient.
“The upcoming Ethereum merge is the biggest narrative in crypto right now and explains why Ether has outperformed Bitcoin over the past month,” Antoni Trenchev, co-founder of crypto trading platform Nexo, told CNBC via email.
“A blockchain that bills itself as energy efficient will always capture the imagination of the masses, and that’s why Ether has the wind in its sails ahead of merger, a move to proof of stake.”
Sustainable rally?
But the recent ether rally, doubling its price in two months, has been rapid.
One analyst said the rally could continue but there might be some resistance around $2,000. Ether was trading at $1,814 on Friday.
Jacob Joseph, research analyst at data service CryptoCompare, said that with no Federal Open Market Committee meeting scheduled for August and stocks rallying, “it’s reasonable to think Ethereum can still rally if we look at it approaching fusion”.
“However…$2,000 has proven to be a major resistance for Ether and the asset needs more wind behind its sails to break this level.”
Joseph added that Bitcoin is unlikely to outperform Ether in the near future.
According to Trenchev, there are risks to the ether price rally.
“Any further (unlikely) delay in mid-September merger will see much of Ether’s 50% rally since mid-July unwind,” he said.
There is always a chance that traders will also take profits on the big rally, Trenchev said.
“If the merger is successful, it could well prove to be a buy the rumor, sell the news type event given the staggering gains we’ve seen on Ether,” Trenchev added.