Reasons Behind Today's Price Rise In Ether (ETH)

The Ether market is showing stronger performance compared to the broader cryptocurrency market, notably surpassing BTC in what appears to be a typical rally following a Bitcoin halving event.

Source: economictimes.indiatimes.com

Ether's price has surged by 4.25%, reaching around $3,200 on April 21st. This increase mirrors the upward movement seen across the broader crypto market, which has experienced a 3.5% rise in total market capitalization during the same period. Let's delve into the key factors driving Ether's outperformance compared to the broader crypto market.

There Is Been A Capital Rotation From The Bitcoin Market To The Ether Market

The gains in Ether against the U.S. dollar are mainly fueled by capital flowing into the Bitcoin market. Notably, the ETH/BTC pair has risen approximately 2.5% in the last 24 hours, reaching 0.048 BTC on April 21. Consequently, the Ethereum Dominance Index (ETH.D), which measures Ether's market strength against the rest of the crypto market, has grown by over 1% in the same period. These gains are part of a rebound that commenced on April 19, coinciding with Bitcoin's fourth halving. Since this pivotal event, the ETH/BTC ratio and ETH Dominance (ETH.D) have increased by around 3% and 0.75%, respectively. 

Historically, the Ethereum market has often experienced increased capital inflows from the Bitcoin market shortly after each Bitcoin halving event. For instance, following the second halving in July 2016, the ETH/BTC pair surged by as much as 64%. Similarly, after the third halving in May 2020, this pair witnessed an increase of nearly 100%. This pattern implies that investors tend to either sell their BTC holdings or decrease their demand for Bitcoin once the halving takes place, as the expected price surge prior to the event is typically already priced in. As a result, alternative cryptocurrencies like Ether benefit from this change in investor attention, as capital redirected from Bitcoin looks for fresh growth opportunities elsewhere in the crypto market.

The Return Of Ethereum Whales

Before Ether's recent surge, there had been a notable period of accumulation among its wealthiest investors, commonly referred to as whales. Data reveals that the Ether supply held by addresses with balances ranging from 1,000 to 10,000 ETH has risen over the past two weeks. Similarly, entities holding between 10,000 and 100,000 ETH have also seen a recent increase in Ethereum supply, signaling the comeback of whales to the Ether market. Interestingly, this accumulation trend has historically preceded substantial price gains, similar to the current upward movement observed in Ether.

Disclaimer: FameEX makes no representations on the accuracy or suitability of any official statements made by the exchange regarding the data in this area or any related financial advice.