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Home General

Reasons Ethereum is hitting High in 2021

Dare Afolabi by Dare Afolabi
20th January 2021
in General
Ethereum - techbuild

Credits: currency

Ethereum (ETH) appears to have been outranking Bitcoin (BTC) for the past couple of weeks as the crypto coin gradually gains momentum.

Since the turn of 2021, ETH has been hitting high and has outperformed Bitcoin since Friday, January 1, 2021.

Ethereum has gained up to 81% in USD pairs year-to-date compared to Bitcoin’s 26%.

ethereum1
Credits: Capital

In this article, we shall look at why ETH has been outperforming BTC in the past few days.

Some of the reasons range from an Increase in DeFi’s sentiment, relatively low volatility to Ethereum’s accelerating growth

Increase in DeFi’s sentiment

The rise of ETH can be traced to the increase in DeFi’s sentiment. DeFi which is referred to as ‘Decentralized Finance’ has tokens that have seen a rise, led by SushiSwap and Aave.

DeFi tokens in return have been in parts fuelled by fast growth in the total value locked (TVL) of the DeFi market.

This estimates the number of capital that gets deployed to DeFi protocols.

Ethereum - techbuild
Credits: Statista

With more than $24 billion, more capital has been locked across DeFi protocols in recent times, this development has caused a huge demand for the crypto coin.

This massive demand is significant to drive the momentum of Ethereum and by extension, its Ether token as more apps and tokens across the world now depend on the Ethereum blockchain network.

The increment in Ethereum gas fees has indicated a rise in the number of users.

This positive factor is an indication that the users are willing to pay, showing real demand for the crypto coin.

The cumulative fee is an indicator showing the willingness of users to demand for block space as the most valuable block space currently is Ethereum.

Though other layer one blockchain protocols are coming up with stiff competition against Ethereum,

Nevertheless, with DeFi’s protocol and Ethereum’s network effect, it is not likely that ETH’s dominance will come up for a big challenge in the long run.

BTC’s low volatility

BTC in the past several days has recorded low volatility, a development that has enabled other altcoins to level up. This development has led to an increase in demand for altcoins with lower liquidity and volume.

Coincidentally, the increase in the price of Ether has fallen in period crypto coin traders call altseason,”. A season that has seen altcoins increase in value while bitcoin has recorded small price movements.

Altseason usually occurs in January, and that is when Bitcoin is experiencing market fluctuations and investors are seeking high-risk plays.

Usually, altcoins see a bigger price movement due to their low liquidity, a result that exposes them to extreme volatility in a very short period.

Traders are now finding lesser cryptocurrencies more entreating due to the increase in its, volatility of the altcoin.

However, BTC has remained in a fluctuating position, with indications from crypto traders that BTC may go down rather than hitting the high points.


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