How Ethereum (ETH) Price Rally Boosts Altcoin Season
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Ethereum (ETH) extended its rally above $3,000, on track to reach 0.06 BTC, the highest Bitcoin valuation since July 2018. After months of predictions ETH would continue to drop while BTC soars, the tables seem to have turned.
ETH reached all-time highs above $3,370 on Tuesday, causing an all-market rally and additional expectations for an extended altcoin season. ETH is now more integrated into the crypto ecosystem and may affect altcoins through DeFi trading.
At the same time, BTC prices took a step back below $56,000 while the ETH rally lasted. BTC dominance is dropping, as interest in altcoins strengthens. The BTC market cap dominance fell toward 46%, signalling increased interest for altcoins.
The recent rally caused market turmoil, as bearish attitudes to ETH prevailed until recently. The spike above $3,300 caused peak liquidations on ETH futures markets.
ETH price discovery is spread evenly to multiple exchanges, with no single market responsible for the price direction. In 2021, the ETH/BTC pairing has a relatively small influence, with most of the price discovery happening in the USDT pair or against USD.
ETH is also expected to hold its position against BTC, possibly reaching 0.1 BTC in the current bull market.
ETH mining is at an all-time high, showing miners are also trying to make the most of block rewards and fees before network upgrades diminish their earnings.
Ethereum Classic Booms in Response
The unexpected effect of the ETH rally was a strong appreciation of an almost forgotten coin, Ethereum Classic (ETC). The asset, which sank as low as $3 during the bear market, is now at $52.95 and tripled its price in Satoshi terms.
ETC was picked up for being a practical copy of the Ethereum network, though underused and with a much smaller pool of miners. The asset may still be problematic and require multiple confirmations when moved to exchanges. The reason for this is that the network was small enough to attack and double-spend coins, thus razing the asset’s credibility and removing it from view for years.
But ETC still had a strong community, with an incentive to hold and wait for more significant appreciation. ETC is also well-represented on exchanges, as it got an automatic listing after the hard fork in 2016.
ETC remains riskier and less liquid compared to ETH, and has not built the same DeFi ecosystem.
Ethereum Staking Has Higher Barriers to Entry
Even staking a minimal amount of ETH in the upcoming ETH 2.0 network will be inaccessible for smaller investors. Running a validator node, which requires 32 ETH, now comes at a significant cost.
ETH 2.0 is still in the works, and may take years to be realized. But it is possible that exchange wallets and other large-scale holders will be better positioned for staking compared to retail owners.
Older ICO Projects Grow Richer
Some ICO projects, which did not liquidate their ETH in the past years, will see themselves with newfound power. It is possible that less active ICO tokens from the 2017 and 2018 boom may get revived as the project is once again well-funded.
This time, however, there is even less incentive to sell the ETH, with opportunities for staking, DeFi liquidity mining or other sources of passive returns.
What’s the Next Stop for ETH?
The rapid price climb brought to light the fact that ETH is still down 60% from its all-time high against BTC. The rally is expected to continue in 2021, with the potential for $5,000 in the short to medium term.
Other predictions envision ETH taking an even steeper path to reach $10,000 or an even higher valuation.
Interest in ETH usage is at an all-time high, with transactions now above 1.4M per day. Transfers on the Ethereum network depend on DeFi usage, as well as NFTs and other distributed apps.
The other source of network usage is Tether (USDT), as the Ethereum network carries the bulk of those tokens. At the very least, ETH is becoming valuable as a means to pay for transactions.
Platform Coins Keep Booming
The rise in ETH usage and price appreciation is in fact beneficial for its competitors. Binance Coin (BNB), one of the alternatives to DeFi liquidity, rose to $665.08 in a renewed rally.
Some of the projects booming are former Ethereum-based tokens created for an ICO, which then moved on to create their own networks. Despite the bear market, Ethereum’s influence expanded beyond the asset itself, and into new value-generating platforms.
WAVES, one of the most actively developed platforms, also performed spectacularly on Tuesday. The asset rose more than 23% within minutes, reaching an all-time high above $39.
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