coincodex.com
Key highlights:
- Ethereum has been significantly outperforming Bitcoin in the last month
- JPMorgan analysts say that the ETH market seems to be less dependent on levered demand than the BTC market
- The higher turnover of the Ethereum blockchain also improves ETH's liquidity, and decreases the impact of futures liquidations on the market
What's behind Ethereum outperforming Bitcoin?
Ethereum has been significantly outperforming Bitcoin as of late – the price of ETH is up a whopping 56.1% in the last 30 days, while Bitcoin registered a disappointing 4.6% drop in the same period.
Bitcoin dominance, a metric that tells us how much of the total cryptocurrency market cap is taken up by Bitcoin, is also continuing to trend downwards. Today, Bitcoin dominance dropped to 47.4%, a new 1-year low.
In the cryptocurrency market, there’s often a cyclical relationship between Bitcoin and altcoins – Bitcoin leads the charge for a while, and then takes a back seat as investors pour their profits into more speculative altcoins in hopes of amplifying their gains. Given that the Bitcoin dominance continues to decline, we’re now clearly in the "altcoin" part of the cycle.
But are there any other reasons besides this cyclical tendency of the cryptocurrency market for why altcoins and specifically Ethereum are outperforming Bitcoin at the moment? Analysts at prominent investment bank JP Morgan recently shared their thoughts on this very subject.
JPMorgan analysts noted that while the derivatives markets for both BTC and ETH were de-levered earlier in April (there was a record-breaking amount of futures liquidations on April 19 amidst a BTC price drop), ETH’s spot markets have seen a stronger recovery. According to the analysts, one of the reasons for this is due to the Ethereum blockchain’s higher turnover:
“Higher turnover on the public ETH blockchain means a noticeably higher fraction of those tokens can be considered highly liquid, further blunting the impact of futures liquidations.”
They also said that the Ethereum market currently appears to be less reliant on derivatives and has a "more durable underlying demand base".
The analysts added that Ethereum could continue gaining ground against Bitcoin thanks to DeFi and the broader Ethereum ecosystem. That, combined with levered demand having less impact to the ETH price than it does to BTC, could provide a "technical but occasionally important" boost for ETH against BTC.