Ether’s Post-Upgrade Jump Elbows Bitcoin Out of Crypto Spotlight
(Bloomberg) — Ether has grabbed the spotlight from Bitcoin as cryptocurrencies extend their rally this year.
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The second-largest digital asset is up 14% this week, outpacing bigger rival Bitcoin’s 9% gain over the period, thanks to optimism created by the latest software upgrade to the token’s underlying Ethereum blockchain.
The revamp of crypto’s main commercial highway allows investors to queue up to withdraw Ether coins they had pledged to help power Ethereum in return for rewards – a process known as staking.
Those most in love with digital assets argue that this new flexibility to extract Ether beautifies the lure of staking and therefore the token itself in the longer term. Concerns that the possibility of pulling out would trigger a flood of Ether sales have also proven unfounded, at least so far.
“We’re already seeing more institutional demand for Ethereum now that they can stake, unstake, more instant liquidity,” Annabelle Huang, managing partner at crypto lender Amber Group, told Bloomberg Television.
At the same time, crypto traders remain wary given that the Ethereum Shanghai upgrade only took place on Wednesday.
The impact of allowing withdrawals of stake rewards and seed capital “is yet to be seen,” crypto fund manager Digital Asset Capital Management wrote in a note, adding that it “will be closely monitoring both withdrawals and on-chain sales data to see if it results in sales pressure.”
About 86,000 net Ether tokens, worth $182 million at current prices, have been withdrawn so far since the Shanghai upgrade — a sliver of the 17.4 million Ether money unlocked for staking, data from Nansen shows.
Ether climbed as much as 6% on Friday to trade at $2,113 as of 11:51 a.m. in Singapore. It surged year-to-date to 76%, narrowing the gap to Bitcoin’s 86% rally. The largest token went up to $30,760.
Digital assets have partially recovered this year from a $1.5 trillion crash in 2022 that triggered a series of explosions and scandals, most notably the bankruptcy of the FTX exchange.
Speculative investments such as crypto have also been buoyed by expectations of an eventual easing of the Federal Reserve’s monetary policy. But uncertainty continues to cloud the market outlook.
“Personally, I don’t think we’re out of the woods yet,” Amber’s Huang said.
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