Cryptoverse: Ether snaps at bitcoin’s heels in race for cryptocurrency

Sept. 13 (Reuters) – For years, ether could barely dream of challenging its big brother bitcoin. Now its ambitions can become more realistic.

The second-largest cryptocurrency is taking market share from bitcoin ahead of a major “Merge” software upgrade that could sharply reduce the energy consumption of its Ethereum blockchain, should developers pull it off in the coming days.

Bitcoin’s dominance, or its share of the crypto market’s market capitalization, has fallen to 39.1% from a year-to-date peak of 47.5% in mid-June, according to data platform CoinMarketCap. Ether, on the other hand, has risen to 20.5% from 16%.

The upstart is still far from overtaking bitcoin as the No. 1 cryptocurrency, a turnaround known to aficionados as “the flippening.” It’s made up the ground, though; in January 2021, bitcoin ruled at 72%, while ether occupied a slim 10%.

As for the price, one ether is now worth 0.082 bitcoin, near the highs of December 2021 and sharply above the 2022 low of 0.049 in June.

“People now see Ethereum as essentially a safe asset because they’ve seen the success of the network, they think it’s not going anywhere,” said Joseph Edwards, head of financial strategy at fund management firm Solrise Finance.

“There is a permanence in how Ethereum is perceived in the crypto ecosystem.”

CAPRICIOUS CRYPTO

The merger, which is expected to take place on Thursday after several delays, could lead to wider use of the blockchain, potentially boosting ether’s price – although nothing is certain in a fickle crypto market. Read more

Ethereum forms the backbone of much of the “Web3” vision of an Internet where crypto plays center stage, powering applications involving crypto offshoots such as decentralized finance and non-fungible tokens – though this much-hyped dream remains unrealized.

Bitcoin and ether have both nearly halved this year due to concerns about large interest rate hikes from central banks. Nevertheless, investors seem to like the look of the merger, with ether up over 65% since the end of June. Bitcoin has barely budged in the same period.

“We’re going to see (ether’s) attractiveness to some investors who are concerned about energy consumption,” said Doug Schwenk, CEO of Digital Asset Research, although he cautioned that ether was still some way behind bitcoin.

THE KING IS STRONG

Bitcoin’s waning dominance in crypto’s current bear market is a departure from previous market cycles where investors sold smaller tokens — “altcoins” — in favor of the more liquid and reliable bitcoin.

However, dethroning the king is no easy feat.

Bitcoin is still by far the most well-known cryptocurrency. Mainstream investors who have dipped their toes into the crypto market since 2020 have tended to turn first to bitcoin, as the most liquid and most traded token.

Its market cap of $427 billion is still more than double Ether’s $210 billion, and market participants are confident that the original digital coin will remain the gold standard in crypto due to its limited supply.

Some market players say bitcoin’s grip on the cryptocurrency is still strong, even if it has to accept other competitors. For example, Hugo Xavier, CEO of K2 Trading Partners, said its dominance could improve to the 50%-60% range if the crypto market turns bullish, but it is unlikely to touch 70% again.

Reporting by Medha Singh and Lisa Pauline Mattackal in Bengaluru; Editing by Tom Wilson and Pravin Char

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