Why hasn't Ethereum broken through its all-time high yet?

While bitcoin's price has doubled from its previous all-time high, ethereum has yet to surpass its price record set three years ago.

The relationship between Ethereum and Bitcoin is quite complicated. In the early days people seemed to always think that Bitcoin and Ethereum were competing with each other. However, such notions come from a lack of clarity about how Bitcoin and Ethereum differ in key ways.

We have touched on this issue in a previous article, the main point is that Bitcoin has developed into a tool for hedging against economic turmoil, a store of value, and in the future it may serve as a reserve currency in the field of encryption and means of payment. Ethereum is a smart contract platform that allows developers to develop projects and launch tokens, while Ether is just a utility token to keep the machine running.

It is often said that if Bitcoin is digital gold, then Ethereum is digital oil.

Why hasn't Ethereum followed Bitcoin to another all-time high?

As the crypto market continues to mature and projects begin to carve out their own niches and valuation logic, we begin to expect to see market dynamics change as well. Assets do not develop in a vacuum, but in relationship to each other.

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Data source: coinmetric

One possible reason for Bitcoin's boom compared to ethereum is that Bitcoin is starting to benefit from institutional support, with big companies like Square and MicroStrategy buying Bitcoin.

Ethereum also has some institutional support. For example, Grayscale, a crypto asset manager that caters to institutional investors, also provides exposure to Ethereum and currently holds about $3.62 billion. But its Bitcoin holdings exceed $22 billion.

However, while with Bitcoin we might have discussions around inflation and the extent to which Bitcoin is sought to hedge, with Ethereum the conversation should be around decentralized finance (DeFi) and other use cases where Ethereum plays a key role.

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Data source: defipulse

Judging from these data, many YouTubers and other influential people are claiming that Ethereum is destined to surpass Bitcoin (the so-called comeback), and although no one knows what may happen in the future, we believe that it is better to take a cautious approach. Better yet, without going too far into speculation. In the right context, things are always best valued on their own merits.

So, like oil and gold, we don't simply compare them side by side, but look at industry-specific metrics.

ETH 2.0

When it comes to Ether, serious investors will not only rely on technical analysis, but also place this analysis in the context of fundamentals, which in the case of Ether means considering product upgrades and roadmaps.

We learned from a previous article on Ethereum that Ethereum has always had plans to introduce more features and functions, and this year, 2021, is expected to see Ethereum move towards 2.0 - that is, Serenity - a major upgrade.

Specifically, ETH 2.0 refers to a series of interconnected upgrades that will make Ethereum more scalable, secure, and sustainable. These upgrades were crafted by multiple teams from across the Ethereum ecosystem.

Scalability: Ethereum needs to support 1,000 transactions per second to make applications faster and cheaper to use.

Security: Ethereum needs to be more secure. As Ethereum adoption increases, the protocol needs to become more secure against various forms of attack.

Sustainability: Ethereum needs to be greener. Current technologies require too much computing power and energy.

Investors will need to keep a close eye on the progress of these upgrades and the community's response.

Also, since Ethereum is a smart contract platform, it should be evaluated against other platforms/tokens such as RSK, ARDR, MATIC, TLOS, EOS, ALGO, XTZ, AVA, ADA, and ATOM. But perhaps, more importantly, investors need to keep a close eye on the dynamics between Polkadot (DOT) and Ethereum. In the coming months, we'll have to see whether the two protocols complement or compete with each other.

Ether is now breaking the edge of $1432. Can it break this long-standing record?

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AAX is a digital asset exchange powered by LSEG Technology. AAX Academy is a user education channel created by AAX, which aims to help more users learn novice tutorials and understand the basics of blockchain.