Ethereum Opportunity? Analysis of current status of Bitcoin Ethereum Market
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  • 2022-09-21
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Summary:As the Ethereum [ETH] merger nears, the king of knock-off coins seems poised to grab all the support it can get. Similarly, ETH goes one step further by flipping Bitcoin [BTC]. Of course, this is not in terms of coin prices or Ethereum market cap.

As the Ethereum [ETH] merger nears, the king of knock-off coins seems poised to grab all the support it can get. Similarly, ETH goes one step further by flipping Bitcoin [BTC]. Of course, this is not in terms of coin prices or market capitalization. ETH overtook BTC for the first time in terms of open interest in options trading.

No other cryptocurrency has come close before. Based on the details, ETH appears to be in bloom as the volume of its options open interest contracts has soared. Blockchain Research noted that ETH option open interest was $8.2 billion, compared to $5.4 billion for BTC. Glassnode also confirmed Arcane Research's report that trading activity in BTC options has been low. In addition, funding rates and future premiums have fallen sharply. ETH, on the other hand, is thriving in these areas. At the time of writing, ETH's perpetual funding rate averaged 0.005%. The current value is down slightly from the value of all exchanges on August 13, when ETH was priced at $1,981.86. In addition, ETH maintains leverage at the food point by virtue of its futures estimates. Although it had been as high as 0.233 on August 14, it remained within the same region of 0.222 at the time of writing. So can ETH maintain its momentum against BTC in the futures market?

A solid opportunity

In current market conditions, we are likely to see this trend continue. Coupled with Ethereum's classic [ETC] performance over the past two months, it seems likely that ETH's transition to proof of Interest (PoS) will help it stay above BTC. But even though ETH has surpassed BTC in price, this effect is not reflected in current prices. In short, there has been a decline. After rising rapidly to $1,900 on August 16, ETH traded below that level, down 1.48% to maintain its price at $1.876.

For BTC, it looks like the top two cryptocurrencies are following a similar trend. At the time of writing, the number-one cryptocurrency by market capitalization was trading at $23,736, down from its price 24 hours earlier. As the merger gets closer, it would be very unusual for some price moves or surprises not to happen.

Ethereum could surpass Bitcoin market cap in the next 12 months?

The research firm said that if the blockchain merger proceeds as planned, Ether issuance rates will decline and daily selling pressure will decrease.

There is a good chance that Ether (ETH) will surpass Bitcoin (BTC) in market capitalization over the next 12 months, as the Ethereum blockchain's shift to a proof-of-interest (PoS) mechanism will reduce token production and from miners, research firm FSInsight said in a Friday report.

Once the transition, known as the merger, is complete, "the inflation rate of supply will fall" and selling pressure from miners will be "locked to zero," the report said. Bitcoin has a market capitalization of about $461 billion, compared with $226 billion for Ethereum, according to CoinDesk data.

According to the report, there is a common misconception that PoS verification will make Ethereum scale better, however, this is false as blockchains are still relatively expensive at the base layer. Sean Farell, head of digital asset strategy at FSInsight, wrote in the report that the main goal is to reduce energy consumption by 99.9% and get more users to contribute to block production. The shift from proof of work (PoW) is the first of five planned upgrades to blockchain, which is expected to take place in September.

FSInsight said that while investors seeking to reduce their risk exposure after the merger is completed may face some secondary market selling pressure, as the network addresses "flow imbalances caused by deflationary supply, there could be a dent in prices."

The note adds that "merge adjacent" names including Lido (LDO), Rocket Pool (RPL), Optimism (OP), and Polygon (MATIC) are attractive opportunities for "high beta" exposure to the process.

Goldman Sachs has released a report saying that Ether could replace Bitcoin as the dominant cryptocurrency in the future. At present, bitcoin is still the most dominant cryptocurrency, so many Wall Street banks have gradually increased their acceptance of bitcoin. For example, jpmorgan Chase has launched a Bitcoin fund, and Goldman Sachs revealed in March that they are developing bitcoin-related investment products.

However, Goldman Sachs predicted in its report that Ethereum will eventually overtake Bitcoin as the dominant cryptocurrency. According to Goldman Sachs, Ether "looks like the cryptocurrency with the most real potential right now, as the native digital currency platform on which it is based is also the most popular platform for developing smart contract applications."

However, Goldman notes that both cryptocurrencies may struggle to displace gold as the most common store of value due to their high volatility.

While some commodities, such as gold, can be used as a hedge against hyperinflation, cryptocurrencies are viewed more as a "risk-on inflation hedge," the Goldman report explains, meaning that the hedge is inherently risky.

On the other hand, there is competition among different cryptocurrencies, which is another risk factor that prevents them from being safe assets at this stage.

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