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In summary
- Ethereum surpassed $3,000 for the first time since August, driven by a general market rally following Trump’s victory, although it still lags behind Bitcoin, which broke its all-time high.
- The incoming Trump administration could bring a more favorable regulatory approach towards cryptocurrencies, especially benefiting Ethereum and its DeFi ecosystem over Bitcoin.
- Despite the rally in Ethereum, regulatory uncertainty and the recent performance of ETFs have slowed its momentum; Meanwhile, traders and options show growing optimism in the short term.
Ethereum has struggled to gain momentum in recent months, while Bitcoin has been rising, breaking its all-time price record several times in early November, and once again on Friday afternoon.
Finally, this Saturday morning, the second-largest Cryptocurrency by market capitalization managed to surpass the $3,000 threshold for the first time since August 2, reaching a high of $3,056. Ethereum had fallen as low as $2,375 on the eve of Election Day.
However, with President-elect Donald Trump’s favorable stance on digital assets boosting the broader market, Ethereum’s price is starting to rise with that momentum, rising 20% in the past week and outpacing the 10% rise of Bitcoin.
Bitcoin continues to push towards new all-time highs, doing so again on Friday with a new high of $77,239.75, according to data from CoinGecko.
Bitcoin’s previous all-time high, set in March, at $73,737, was surpassed Tuesday night as Trump’s victory began to take shape in a surprising dominant display in crucial battleground states, including Pennsylvania.
Even before the election, momentum for the world’s largest asset had already been gaining significant ground.
Investors have allocated billions of dollars to Bitcoin spot ETFs this year, while Bitcoin’s market dominance compared to Ethereum has grown, hitting a three-year high last month.
Although Ethereum’s extensive landscape of decentralized finance (DeFi) applications is a mainstay of the industry, heavyweights like Uniswap have received enforcement threats from the Securities and Exchange Commission (SEC) this year, contributing to a sense of regulatory uncertainty.
However, that could be about to change.
With a Trump-led leadership change at the SEC almost certain, Ethereum’s prospects could change as regulators take a more collaborative approach. There are signs that the merits of Ethereum’s proximity to DeFi could be changing, with related tokens posting gains.
For example. The governance token of Aave, a leading decentralized cryptocurrency lending platform, has risen 29% in price over the past week to $183.
At the same time, the governance token of Ethena, a decentralized stablecoin protocol, has risen 34% to $0.50 in the same period.
“This change in narrative towards an administration that has signaled that they want to address regulatory compliance actions on a platform like Ethereum is likely to be more beneficial for Ethereum than other projects like Bitcoin,” Thomas Perfumo, Head of Strategy at Kraken, told Decrypt. last week.
While Ethereum’s rise above $3,000 was fueled by Trump’s victory, the asset has still underperformed Bitcoin in terms of cumulative gains so far this year.
Bitcoin may have set a new all-time high price on Friday, but Ethereum is still chasing a peak of $4,878 set in November 2021. It was within striking distance of its previous all-time high price in March, when it topped $4,000 for one day.
However, approval of Ethereum spot ETFs seemed less likely after it emerged that the Ethereum Foundation was under investigation by an unnamed “state authority” in March.
The authority turned out to be the SEC, which ended its investigation three months later, according to Ethereum software company Consensys.
(Disclosure: Consensys is one of 22 investors in Decrypt.)
In May, the regulator approved Ethereum spot ETFs, validating the asset’s regulatory status as a commodity.
Although the development was seen as bullish for Ethereum, outflows from the Grayscale Ethereum Trust hampered enthusiasm when the ETFs launched in July, causing downward pressure on the asset’s price.
Even though Ethereum spot ETFs had a lukewarm debut, momentum has shifted since Trump’s victory. Representing its third-best day of inflows since its launch, according to CoinGlass, the commodity class recorded an inflow of $80 million on Thursday.
Recently, there has been growing debate around Dencun, an upgrade to Ethereum that provided layer 2 networks with a dedicated space for posting transactions earlier this year.
Even as its upgrade made Layer 2 networks cheaper, some think Ethereum could be worse off, in part because it has made Ethereum’s total supply inflationary again, as well as a decline in total fee income.
However, that hasn’t stopped traders from speculating on further gains.
“The market maintains strong bullish sentiment,” Nick Forster, founder of onchain options DeFi protocol Derive, told Decrypt last week.
For Bitcoin, options traders are showing a bit of optimism, with a slight positive bias for both the 30-day and 7-day outlooks, Forster added. Ethereum, which is often considered riskier, shows even stronger optimism for those same periods.
That indicates “a surprising increase in bullish sentiment” for Ethereum, he said.
Edited by Andrew Hayward and Sebastian Sinclair
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