Ethereum Soars: Analysts Highlight Strong Fundamentals as ETH Exceeds $2.9K

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• Ethereum’s recent rally surpasses Bitcoin’s, fueled by The Merge and a shift to proof-of-stake.
• Anticipation grows for SEC’s approval of spot ether ETFs, promising a bullish future for ETH.

In an unprecedented week of trading, Ether (ETH), the cryptocurrency powering the Ethereum network, has significantly outperformed Bitcoin (BTC), the market’s long-standing leader.

According to the latest data from CoinDesk, ETH has seen an impressive surge of over 16%, crossing the $2,900 mark for the first time in nearly two years. In contrast, Bitcoin’s gain was a more modest 8.5%, reaching $52,300.

At the time of writing, the price of ETH has decreased by 1.12% in the last 24 hours, but is still in the green in the past week with a gain of 7.73%, sitting at $2,885.48.

Spotlight on Ethereum’s Fundamentals

This notable performance divergence between the two leading cryptocurrencies has captured the attention of investors and analysts alike. Greg Magadini, Amberdata’s director of derivatives, points to the underlying fundamentals of Ethereum as a primary driver of this trend.

The recent shift to a proof-of-stake (PoS) consensus mechanism through an upgrade known as The Merge is at the forefront of these dynamics.

September 2022 marked a pivotal moment for Ethereum with the implementation of The Merge. This transition to PoS not only enhanced the network’s energy efficiency but also initiated a significant reduction in ETH’s supply.

Data from Ultrasound.money highlights this deflationary trend, with 1,407,200 ETH burned and only 1,047,643 ETH issued since the upgrade, leading to a net supply decrease of 359,557 ETH. Explore this development in more depth, by watching this YouTube video here.

Ethereum’s Supply Dynamics Versus Bitcoin’s Halving

While Bitcoin’s halving events have historically slowed its supply growth, Ethereum’s active supply reduction presents a stark contrast. The Ethereum network now burns a portion of transaction fees, removing ETH from circulation.

This mechanism, coupled with the shift from miners to validators, who stake ETH to secure the network, has contributed to a tightening of supply.

The amount of ETH staked on the network has surpassed 30.1 million, locking away 25% of the total circulating supply. This figure is expected to grow, especially with the Dencun upgrade on the horizon, poised to further reduce transaction costs.