Ether Leads Bitcoin on Price as Investors Prepare for Staking Arrival

Bitcoin has entered the seasonally bullish month of June on a positive note, but its recent gains look pale compared to that of ether (ETH), as the Ethereum blockchain approaches a key new iteration. 

Bitcoin, the top cryptocurrency by market value, rose by over 8% last week and ended May with a 9.5% gain. That came after bitcoin jumped by nearly 35% in April, according to CoinDesk’s Bitcoin Price Index. 

Meanwhile, ether’s price rose by 16% last week and 12% for the month of May. Growth in ether’s non-price metrics, too, has been impressive compared to those for bitcoin.

For instance, the seven-day moving average of active ether addresses stood at 12-month high of 337,986 on Sunday, according to data provided by blockchain intelligence firm Glassnode. While ether’s active addresses have risen by more than 10% over the last two weeks, active bitcoin addresses declined by nearly 5%. 

On a more positive note, bitcoin outshone major traditional assets in May. Gold, a traditional safe-haven asset, rallied by 2% over the month. Meanwhile, the dollar index, which tracks the value of the greenback against major currencies, fell by over 0.5% and the S&P 500 index rose by 4.5%.

Analysts expect both bitcoin and ether to maintain their bullish momentum over the near-term. While seasonality is positive for bitcoin in June, supporting the case for an extension of its two-month winning streak,  ether is likely to benefit from Ethereum’s upcoming switch to the proof-of-stake mechanism.

Bitcoin has put in a positive June performance in six out of the last eight years. Moreover, the cryptocurrency has printed gains in the second quarter also in six out of the last eight years, as discussed previously. 

Macro factors, too, are supportive of continued gains in bitcoin, according to analysts.

“Global tensions and uncertainties that have intensified over the past week  and further support the Bitcoin narrative as an alternative investment to protect downside risks,” said Matthew Dibb, co-founder of Stack, a provider of cryptocurrency trackers and index funds.

President Trump, on Friday, announced new, targeted sanctions against Chinese officials and directed his administration to revoke special trade exemptions for Hong Kong. The move came in retaliation to Beijing’s decision to curb Hong Kong’s autonomy by imposing a new security law on the city. The tensions could further escalate, as China is now considering plans to halt imports of soy from the U.S. 

Dibb also expects the weakness in China’s yuan and the possible introduction of negative interest rates in the U.S. to bode well for bitcoin and precious metals like gold. 

“Technically, we are expecting a break of $10,000 over the next two weeks and a further push to $11,000 by July,” Dibb added. Meanwhile, Su Zhu, CEO of Three Arrows Capital, said that, “BTC’s moment will be a clean break of the key round figure of $10,000.”

Indeed, bitcoin has failed multiple times in the last three weeks or so to shake off selling pressure in the range of $9,900 to $10,000. So, a convincing break above the psychological resistance could cause more buyers to join the market, leading to stronger gains. 

At press time, the cryptocurrency is trapped in a narrowing price range. The direction in which the range is breached will likely set the tone for the next big move. 

A bullish breakout could be seen, as investor sentiment is at its most bullish in years, according to on-chain data. For instance, nearly 60% of bitcoin’s supply hasn’t changed hands in over 12 months, a likely sign investors are holding in expectation of gains, according to Glassnode. 

A similar percentage of supply was lying dormant for over a year at the start of the mega bull run in 2016. 

Ethereum’s impending transition from a proof-of-work (PoW) mechanism to proof-of-stake (PoS) in a major upgrade dubbed Ethereum 2.0 likely boded well for ether in May. Buying pressure for the cryptocurrency may remain strong in the near term, with the launch of Eth 2.0 due in Q3,  2020.

“It’s hard to be bearish with Ethereum staking coming soon. I suspect there will be a lot more ether staked than the projected 10-30 million. Perhaps even 50 million-plus if a lot of people select to stake through exchanges/rocket pool,” tweeted David Schwartz, a senior software engineer at Nash, a decentralized exchange. 

Staking rewards network participants for holding coins, in a similar way to earning interest on savings.

The sharp rise in the number of addresses holding 32 ETH or more, an amount a holder is required to maintain as a balance to become a validator on Eth 2.0 (and hence earn staking rewards), suggests investors are accumulating coins in preparation for the upgrade. 

Technical charts suggest that ether could continue to outperform bitcoin, too. The MACD histogram, an indicator used to identify trend changes and trend reversals, has crossed above zero on the ether-bitcoin monthly chart for the first time on record, as noted by popular analyst and engineer @IamCryptoWolf on Twitter.

The MACD’s move above zero indicates a bearish-to-bullish trend change in the ETH/BTC exchange rate. Put simply, the market expects ether to fare better than bitcoin. 

Lennix Lai, director of financial markets at cryptocurrency exchange OKEx, expects bitcoin and the broader cryptocurrency market to benefit from the increased investor interest in ether. “The upcoming ETH 2.0 [upgrade] shall encourage more people to stake ETH and ultimately benefit the sentiments of the crypto market as a whole,” said Lai.

Disclosure: The author holds no cryptocurrency at the time of writing.