Ouyi OKEx Observation: Two Reasons to Understand the Logic of Ethereum Skyrocketing

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Ouyi OKEx Observation: The price of Ethereum hits new highs, can it shake the dominance of Bitcoin?

According to the OKEx market, Ethereum hit $3,548.41 on May 6, an increase of nearly 30% from the lowest point on May 1 ($2,732). Since the beginning of the year, the highest increase of Ethereum has reached 389%.

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The market trend of Ethereum within the year (source: OKEx)

In terms of market value performance, Ethereum also ushered in a bright moment. According to AssetDash data, the current market value of Ethereum is about 402.3 billion US dollars, ranking 17th in the global asset market value list, surpassing Wal-Mart and approaching Samsung and Johnson & Johnson.

Regarding the reasons for the strong rise of Ethereum, William, the chief researcher of Ouyi OKEx Research Institute, summarized two points in an interview with the media:First of all, the blockchain network is different from the ordinary network

. On ordinary networks, most of the value will be concentrated in the application layer (such as Amazon, Facebook), but it is difficult to capture value at the network protocol layer (such as TCP/IP protocol); The network protocol layer where the value is concentrated (such as the Ethereum network), and a small part of the value is distributed in the application layer (distributed application). The main reason is that the encrypted digital currency (ETH) issued by the blockchain network protocol layer is the basis for the normal operation of all distributed applications (as gas fuel fees, collateral, investment and financing). Taking distributed finance as an example, currently 90% of DeFi is concentrated in the Ethereum network. Since the explosion of DeFi applications in June last year, the lock-up value of the DeFi protocol (ETH lock-up volume) has grown exponentially. The prosperity of DeFi has directly driven the market demand for ETH and driven up the price of ETH.

Secondly, Canada’s Toronto Stock Exchange launched three Ethereum ETFs at the end of April, providing investors in the traditional financial market with a compliant access to funds; the European Investment Bank also reported that it will issue digital bonds on Ethereum ; These news are directly beneficial to the rise of ETH prices.

However, from the perspective of the entire encryption market, the recent market has been polarized. On the one hand, Ethereum, Dogecoin, ETC, BCH, etc. have risen alarmingly; on the other hand, Bitcoin continues to fluctuate, and its dominance over the encryption market seems to be weakening.

The reason is that William believes that Bitcoin can be regarded as "Moutai" in the field of encrypted digital currency. After nearly half a year of Bitcoin bull market, due to the high price of Bitcoin, the price base is too large, and it is difficult to obtain high returns for funds now. , so most of the funds are holding a wait-and-see attitude. As long as the price of Bitcoin falls, they will cover their positions. This is also one of the reasons why the price of Bitcoin has continued to fluctuate recently.

Compared with Bitcoin, other high-quality encrypted digital currencies are still in a "price depression", such as Ethereum, which must rise to at least $4,000-5,000 to reach a similar level to Bitcoin; Dogecoin, an old-fashioned large-block currency such as BCH, has been chased by market funds.