Ether, the second-largest cryptocurrency, is struggling to match the soaring performance of its big brother, Bitcoin.
Despite its position in the $2.7 trillion crypto market, Ether’s growth has been modest compared to Bitcoin. In the first three months of this year, Ether has seen an increase of around 53%, while Bitcoin has surged by 65%.
While Bitcoin reached new peaks last month, Ether, currently trading around $3,612, remains at least 26% below its November 2021 all-time high of $4,867.60.
Even a recent technical upgrade of the Ethereum blockchain, aimed at reducing transaction fees within its ecosystem, failed to generate significant excitement beyond the crypto community. In contrast, anticipation is building ahead of Bitcoin’s upcoming “halving,” a technical adjustment designed to slow the coin’s supply.
Following Ethereum’s Denburn upgrade on March 13, which aimed to lower transaction fees, Ether experienced a 12% drop, reflecting a common market phenomenon where significant events are followed by sell-offs.
Joseph Edwards, head of research at London-based crypto firm Enigma Securities, noted, “Ethereum is persistently dogged by its lack of name recognition among non-endemic investors… reaching all-time highs will likely come fairly late.”
The approval of spot Ether exchange-traded funds (ETFs) by the U.S. Securities and Exchange Commission (SEC) could be a significant turning point for Ether’s trajectory. The approval and subsequent launch of spot Bitcoin ETFs drove institutional demand and pushed Bitcoin to record highs.
Ether ETFs are currently awaiting approval, with VanEck’s filing leading the line for a decision on May 23.
However, not everyone shares the same level of optimism regarding the approval of a spot Ether ETF by U.S. regulators. The legal status of Ether remains ambiguous, and some expect regulators to proceed cautiously.
Unlike Bitcoin, Ether operates on a ‘proof-of-stake’ blockchain, allowing users to earn yields by locking up tokens. This feature raises questions about whether Ether could be classified as a security, which would subject it to stricter regulations.
Anders Helset, head of research at digital assets analytics firm K33, believes, “Getting the SEC on board to allow staked ether ETFs will be a very tough bargain and is, for now, extremely unlikely.”
While institutional demand for Ether lags behind Bitcoin, there is growing interest in Ethereum’s technology. BlackRock recently unveiled its first tokenized fund on the Ethereum blockchain, sparking discussions about broader tokenization of real-world assets using the platform.
Despite the challenges, Ethereum’s technology continues to underpin much of the internet’s ‘Web3’ vision, supporting applications in decentralized finance and blockchain gaming. Over $2 billion worth of commodities and government securities have been tokenized on various networks, with Ethereum hosting 80% of these assets, according to Swiss cryptocurrency manager 21Shares.