By Jasper Hamill
Ether, the world’s second-largest cryptocurrency, has hit an all-time high just weeks after bitcoin also soared to its highest-ever value.
It hit $4,656 on November 3 before dipping slightly and hovering around the $4,525 mark.
Ether has outperformed Bitcoin dramatically this year, offering significantly greater returns to investors.
It has soared by more than 530% in 2021 after starting January at a price of $730. When Bitcoin hit its all-time high in October, it had experienced a 127% rise since the beginning of 2021 - climbing from $29,405 to just under $66,900.
The Ether ATH came after CME Group, the world’s largest financial derivatives exchange, announced that it will launch an innovative new investment product on December 6 called Micro Ether futures. These crypto derivatives are sized at one-tenth of one ether.
Mikkel Morch, executive director at the crypto and digital assets hedge fund ARK36, said: “ETH has now outperformed Bitcoin almost 5 times in terms of year-to-date returns and there are a few reasons to believe it may continue to do so.
“Firstly, as institutional investors are entering the digital asset market more decisively, they will be looking to diversify their portfolios and invest in assets beyond Bitcoin. Ethereum, the second-largest cryptocurrency by market cap, and one with a robust community and a lively ecosystem seem to be their natural second choice.”
Ethereum has been gaining in popularity due to the rise of DeFi and NFT projects that use the Ethereum blockchain and its smart contract functionalities. This has driven a rise in demand for Ether as its blockchain is used to buy, sell, and trade digital artwork.
“As this current bull market is heating up and as DeFi and NFTs continue to enter the mainstream ever more decisively, Ethereum seems to be on a path to a double-digit price tag within the next few months,” Morch added.
Martha Reyes, head of research at the digital asset prime brokerage and exchange BEQUANT, said Ethereum was “coming out from under the shadow of bitcoin” and predicted that a futures ETF based around Ether could be on the way, following the launch of the world’s first bitcoin ETF.
“In addition, the blockchain’s use cases are becoming more well known, whether it’s defi, NFTs, gaming or the metaverse,” she continued.
“ETH issuance is falling post the London upgrade, making it less inflationary and we just had a successful Altair upgrade, so one more step towards the switch to proof of stake. We also like smaller but rapidly growing alternatives such as Solana.”
Another analyst suggested that the rise of Ether was linked to the recent all-time high of bitcoin, which leads the way for other cryptocurrencies to follow.
Ruud Feltkamp, CEO of cloud-based automated crypto trading bot Cryptohopper, said: “Many altcoins follow almost the same path as Bitcoin, but with a two-week delay. It is therefore not so bizarre to see that exactly two weeks after the peak of Bitcoin, this is happening again - this time with Ethereum. In addition, it has also been the first week of deflation for Ethereum.
“I expect Bitcoin to peak around Christmas. If this happens, I expect Ethereum to peak in the second week of January 2022."
The CME Group’s Micro Ether futures join a suite of 20 other micro products which have resulted in the trade of more than 1 billion contracts
Micro Bitcoin futures have traded more than 2.7 million contracts since launching in May whilst 675,500 Ether futures contracts (equivalent to about 33.8 million ether) have also traded.
Financial products based on crypto are often seen as a good sign for the wider markets because they indicate growing mainstream and institutional acceptance.
"Since the launch of Ether futures in February, we have seen steady growth in liquidity in these contracts, especially among institutional traders," said Tim McCourt, CME Group Global Head of Equity Index and Alternative Investment Products.
"At the same time, the price of ether has more than doubled since these contracts were introduced, creating demand for a micro-sized contract to make this market even more accessible to a broader range of participants.”
