25 February, 2024

Ethereum ETF Hype and Upgrades Drive Resurgence in Market

1 month ago

25 Jan, 2024

  • Bitcoin’s open interest dominance has grown to 66.2%, showcasing its resilience in the crypto market.
  • Ethereum’s resurgence, driven by ETF approval and cost-reducing upgrades, has boosted its open interest dominance to around 40%.
  • Positive sentiment and potential Ethereum ETFs signal a promising future for Ethereum’s competition with Bitcoin.

The landscape of cryptocurrency markets has been evolving rapidly in recent years, with Ethereum (ETH) making significant strides to challenge Bitcoin’s dominance. One key metric to analyze this shift is the open interest in derivative markets, particularly perpetual swaps. 

As per Glassnode, in January 2022, Bitcoin’s perpetual swaps accounted for 55% of the total open interest, reflecting its undisputed dominance in the crypto derivatives arena. Fast forward to 2024, and Bitcoin’s position has strengthened even further, now constituting a commanding 66.2% of the open interest. This surge underscores Bitcoin’s resilience and appeal as a digital asset.

Conversely, Ethereum’s open interest dominance has experienced a somewhat different trajectory. Between 2022 and 2024, it declined from 45% to 33.8%. However, following the approval of Ethereum Spot Exchange-Traded Funds (ETFs), Ethereum began to regain ground, with its dominance rebounding to approximately 40%. This uptick signifies renewed interest and confidence in Ethereum, driven by the ETF approval and other factors.

Several factors have contributed to this resurgence in Ethereum’s market performance. As highlighted by Michaël van de Poppe, a prominent blockchain figure, one crucial catalyst is the Ethereum Spot ETF hype. Just as Bitcoin’s ETFs brought significant attention and capital into the market, the approval of Ethereum ETFs is expected to have a similar impact. With clarity on the regulatory front, Ethereum ETFs may materialize sooner than expected, drawing more investors into the Ethereum ecosystem.

Moreover, Ethereum has been actively launching upgrades aimed at reducing transaction costs significantly. These upgrades are crucial for improving the overall usability and efficiency of the Ethereum network. As these enhancements are implemented, it’s likely to make Ethereum even more appealing to users and investors alike.

Another significant aspect to consider is the interplay between Bitcoin and altcoins like Ethereum. When Bitcoin experiences a downturn and appears to be bottoming out, it often triggers a new wave of interest and investment in altcoins. This phenomenon could contribute to Ethereum’s momentum in the coming weeks and months.

Despite recent price fluctuations that have seen Ethereum revisiting cycle lows, investor sentiment around the cryptocurrency remains positive. Glassnode’s data indicates a notable improvement in investor sentiment, with the net unrealized profit/loss (NUPL) metric for short-term tokenholders crossing above 0.25 for the first time since the November 2021 all-time high. This suggests increasing optimism among holders and a potential shift in capital flows within the crypto market.

Ethereum short-term holder NUPL. Source: Glassnode

Ethereum’s journey in the cryptocurrency market has been marked by fluctuations in open interest dominance, but recent developments, including the ETF approval and network upgrades, indicate a resurgence in its market position. With Ethereum ETFs on the horizon and positive sentiment among investors, the stage is set for Ethereum to continue making strides in its competition with Bitcoin in the crypto world.