Despite ether handily outperforming bitcoin over the course of 2020, there was one thing that the world’s second-largest cryptocurrency was unable to achieve: a new all-time high.
All of that changed on Jan. 19, when ETH finally broke the record of $1,432.88—a milestone that had been set three years ago this month.
The new all-time high was set in a low-key way to say the least. Gemini reported that ETH managed to reach $1,440 on its exchange, but the altcoin has struggled to surge further than this.
In a way, the price activity is not too dissimilar to BTC back in November, when it flirted with a new record before cooling slightly. The question now is whether ether will surge further and enter a period of price discovery—with some analysts arguing that ETH is drastically undervalued given how it serves as a lynchpin of the decentralized finance (DeFi) ecosystem.
With ETH up 15% over the past 24 hours, comfortably outpacing BTC’s more modest gains of 3%, MyEtherWallet COO Brian Norton believes this milestone is a “positive indicator for the future of ETH despite recent criticisms of high gas prices on the chain.”
In an interview with Modern Consensus via email, he added: “2020 saw the explosion of the DeFi ecosystem on Ethereum—first hitting $1 billion in total value locked in February, now $20.5 billion in only 11 months. This growth has attracted many new users seeking yields that are not available on Bitcoin with centralized intermediaries.” He added:
“What I am watching is developer activity on Ethereum, as it serves as an indicator that new and better use cases are coming which will increase demand for the native asset. Ethereum has over 5x the number of active developers as Bitcoin, and is adding developers at a faster rate every day.”
Where things stand
ETH levels on centralized exchanges have fallen markedly in recent weeks, and this is normally interpreted as a bullish signal.
But there’s no getting away from the fact that Ethereum is still struggling to keep average transaction fees under control. According to Bitinfocharts, they reached $16.52 on Jan. 11—with critics arguing that such high costs risk making DeFi protocols unusable. All of this has added fuel to the fire of Polkadot, which has been dubbed an “Ethereum killer” owing to the fact it can handle greater volumes of transactions more cheaply.
As development on ETH 2.0 continues, which will see the blockchain move to a Proof-of-Stake consensus mechanism in a couple of years, all eyes now are on the imminent launch of ETH futures by CME Group. Past research that examined how the launch of Bitcoin futures affected the cryptocurrency’s volatility concluded that these instruments did help to deliver a degree of stability to the BTC market. But this didn’t eliminate sudden movements altogether, as the flash crash that followed in March 2020 painfully illustrated.
Ether’s market cap now stands at $160 billion at press time—barely a quarter of Bitcoin’s $687 billion valuation. Nonetheless, it has strengthened impressively against BTC over the past 12 months. Whereas ETH would have cost you 0.019 BTC on this day a year ago, it will now set you back 0.038 BTC.