While the Bitcoin price has effectively flatlined, finding itself in no man’s land between $10,000 and $10,500, Ethereum has shown some strength.
This move has caught many traders with their pants down, as most have been expecting for Bitcoin’s market dominance to continue to rip higher.
Per the time of writing this article, the cryptocurrency has trended to $197, which translates a 3.5% gain in the past 24 hours, while BTC has posted a slight 0.64% loss.
This strength in Ethereum’s price comes as the network’s fundamentals have continued to improve. Massive companies have started to use the technology, the decentralized finance (DeFi) ecosystem on Ethereum continues to gain traction, and the network is being used more than ever before.
Ethereum in a Strong Fundamental Position
In 2017, Ethereum shocked cryptocurrency investors, rallying from well under $10 to $1,400 in around 18 months’ time — marking one of the biggest short-term wealth creation events that the cryptocurrency markets, even overall financial markets, have ever seen.
This changed in mid-2018, which was when Ethereum started to fall off a cliff as the demand for decentralized applications (dApps) and initial coin offerings tanked. This resulted in Ethereum falling all the way to double digits by December 2018, representing a massive 95% drawdown from the asset’s all-time highs.
Ethereum giveth and taketh away.
But, the wind seems to be in the sails of Ethereum once again — at least from a fundamental point of view.
Last week, Spanish banking giant Santander revealed on Thursday that it had settled a $20 million bond through ERC-20 tokens, which represented custodied cash, on the public iteration of the Ethereum blockchain. As CoinDesk wrote on the matter:
Previously, the World Bank issued a similar blockchain bond but used a private version of ethereum. French lender Societe Generale issued a bond earlier this year on the public ethereum network but said nothing about cash on-ledger.
An executive of Santander’s digital banking initiatives later lauded the pilot transaction, claiming that he sees value in settling bonds on public blockchains like Ethereum.
This comes as the DeFi ecosystem has continued to gain steam, with DeFi Pulse stating that there the amount of ETH locked in Ethereum finance applications is reaching an all-time high. Simultaneously, the number of transactions made with Tether’s USDT stablecoin has continued to surge.
All this has amalgamated in dramatically increased usage of the Ethereum blockchain. Just look to the chart from Etherscan below, which shows that for the first time in about forever, the network’s utilization (defined by average gas per block used over the gas limit per block) has consistently trended in the 90s.
Strong Technical Signs
For those that don’t believe fundamentals are enough to push the Ethereum price around, there have also been technical signs that imply ETH will maintain its bullish momentum. Josh Rager, a prominent analyst and industry investor, noted on Sunday that the ETH/BTC pair has “finally moved and closed above the 20-day moving average”. Rager believes that Ethereum regaining this key support level is a sign that the downtrend has ended, implying a bullish reversal.
Despite this renaissance in Ethereum, there have been investors in high places that have continued to keep their distance.
On September 4th, legendary venture capitalist Fred Wilson came out with his latest blog on the cryptocurrency market. Titled “Some Thoughts On Crypto“, the blog outlined Wilson’s growing skepticism of Ethereum. “Ethereum, as many of you know, confounds me”, Wilson, a co-founder of Union Square Ventures, wrote.
This, for those unaware, comes after he claimed in 2017 that the market capitalization of ETH had the potential to surmount Bitcoin by the end of the year. While the so-called “Flippening” got close to coming to fruition amid the summer of ’17, it never happened.
To date, it still hasn’t happened, with Ethereum currently trading for less than 0.018 BTC — some 85% down from this pair’s all-time high.
Wilson continued, explaining that while the cryptocurrency platform has brought many innovations in the blockchain space — “smart contracts, programmable trust-free computing, potentially proof of stake, and a lot more” — Ethereum remains “hard to build on”. The prominent venture capitalist specifically cites the “scaling issues” and the fact that developers may be jumping ship.