This is why Ethereum has outpaced Bitcoin price gains. Will it last?

The Bitcoin (CRYPTO: BTC) price is trading roughly where it was this time last week.

Meanwhile, Ethereum (CRYPTO: ETH), the world’s number two crypto, is still up 5% on the week.

We say “remaining” up because both tokens have lost ground over the past 24 hours.

Bitcoin price is down 4% while Ethereum is down 6%.

Still, Ethereum has gained an impressive 36% in the past month compared to an 11% price gain for BTC.

So why has Ethereum outperformed?

Ethereum Outpaces Bitcoin Price Gains As Merge Approaches

The answer to Ethereum’s outperformance appears to be the upcoming merger.

This will see the Ethereum blockchain transition from Proof of Work (POW) to Proof of Stake (POS). Once completed, the POW protocol will require much less computing power, cut costs, increase efficiency and produce far less carbon emissions.

While the merger has been in the works for well over a year now, it could finally move from the final stages of testing to live use in the middle of next month.

Commenting on how this transition has helped Ethereum rise faster than Bitcoin’s price, eToro market analyst and crypto expert Simon Peters said:

As for how the market reacts, there is now clear evidence that it is becoming more actively sensitive to developments on The Merge. The [Ethereum]The price has been on an upward trajectory and has reacted positively to the development as investors buy into the token ahead of the change.

But there is a more fundamental long-term potential here. The POS change will change the economics of the token. While other blockchains already use POS, none have the large scale and variety of uses compared to Ethereum.

Will it last?

Ethereum and Bitcoin prices have both fallen over the past 24 hours. Is the Merge party over?

Matt Maley, market strategist at Miller Tabak & Co, said there could be some profit taking going on. He noted that investors may be wary of some worrisome economic data coming out of China.

Maley said (quoted by Bloomberg), “We have to realize that the crypto market is still speculative. I think that’s normal and healthy, digesting the recent gains, especially in Ethereum.

Looking ahead, Alkesh Shah, global crypto strategist at Bank of America, warned of potential further corrections ahead for risk assets, likely to send Ethereum and Bitcoin prices down.

“Our view is that risks associated with rising interest rates, inflation and a mild recession are likely to be discounted,” he said. “However, the potential for a severe recession … could result in growth underperformance and another correction in risk assets, including crypto/digital assets.”