The prices of Ethereum has been underperforming bitcoin this year, as the second-largest cryptocurrency gained less than 5% this year, while BTC has still maintained its staggering 95% YTD gains despite the previous selloffs. In light of the successful implementation of the latest Istanbul network upgrades, and the rising popularity of the Defi, does playing the catch-up game with ETH means a viable strategy for investors? From a macro perspective, Ethereum approval among financial institutions has been rising noticeably, what does that mean for the broader ETH investors?
Bitcoin has always been the most widely quoted cryptocurrency in the world, it often acts as a benchmark of the broader crypto space, and its performance has been a significant market focus since the very first day. Indeed, the cryptocurrency markets look a lot different now than the time bitcoin made its first
debut. The rapid development in the crypto space has widened the broader crypto spectrum, resulting in the rising investment and application appetite for altcoin like ETH, XRP, and EOS. Despite the massive ETH rally in late 2017 to early 2018, the prices of ETH have been significantly underperforming BTC this year.
While many factors may have attributed to ETH’s underperformance, giving a multi-layer analysis could provide us with a more comprehensive look at the there um, and whether the prices of ETH have the potential room to make a decisive turn in the long run. In the age of the internet, investors sometimes could find difficulties to value new economy companies using conventional valuation methods. Despite the over-valued criticisms, the group of the most influential tech giants has been one of the critical drivers of the equity markets for quite sometimes.
Cryptocurrency is also a network value-driven asset, meaning that the more people use it, the higher the value it will be. There were more than 81 million unique addresses in the entire Ethereum network, and the number has been growing solidly since early last year.
However, things would look less robust when considering the usage factor. The number of Ethereum active address has stabilized at around 300K levels since touching 600K in June 2019. Similarly, bitcoin’s active address number has been mainly fluctuating in the range of500K to 700K in the second half of this year,
after reaching 900K in late June.
Another layer of assessment we can add to the Ethereum blockchain is the emergence of Defi. The maker has been a leader in the Ethereum-based Defi space, and its smart contract managed platform allows users to stake, trade, and borrow crypto assets. In November, Maker DAO’s protocol upgrade has created multi-collateral DAI, or MCD, which accepts ETH as collateral for DAI generation.
The underperformance of ETH prices has been getting more noticeable since 2Q19. Investment demands, the cost of achieving consensus, network speed, and other market factors may have attributed to the disadvantage of the Ethereum network and ETH prices. However, the rising of Defi, the growing enterprise interest, and the network upgrades could help to set Ethereum as a critical infrastructure of the digital finance world. Those developments could be a major
the driver of the ETH prices for the long term.