As Bitcoin Approaches All-Time Highs, Ethereum (ETH) Bulls Should Prepare For An Epic Rally

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Ethereum, an open-source blockchain that supports an entire smart contract ecosystem, made history earlier this year when the project’s native Ether coin hit an all-time high. As coin prices have moderated amid a general price swoon across the crypto realm, evidence of another epic bull run is growing hourly.

Of course, as has been the case in recent years, Bitcoin (BTC) is currently leading the charge. In fact, the world’s largest cryptocurrency is now just 6.7% off its all-time high of $ 64,863 recorded on April 14, 2021. Although a number of factors have supported the ongoing recovery of Bitcoin, there is a growing consensus in the market that Ethereum would likely adopt the leadership mantle soon. Lets elaborate.

With the second biggest shorts liquidation since July, Bitcoin is on the verge of making explosive gains ahead of the expected approval of a Bitcoin ETF in October [Updated]

Readers will recall that the larger crypto sphere, including Ethereum, was hammered in early summer as Elon Musk took a much more cynical stance towards Bitcoin. At the same time, China has shaken the last vestiges of this bull run by completely banning crypto mining, forcing a massive exodus of all mining operations out of the country. Since then, however, the US SEC has indicated that a Chinese-style crypto ban is not in sight in the world’s main economy. Additionally, as we detailed in a previous article, the US SEC has now approved a Bitcoin ETF based on futures, eliminating the need to securely store one’s Bitcoin stake in order to gain exposure to performance. cryptocurrency prices. On a technical level, Bitcoin’s upcoming Taproot upgrade also reinforces the bullish thesis of cryptocurrencies. As a reminder, the upgrade aims to improve the privacy of multi-signature (multisig) transactions and unlock the potential of smart contracts, a program that automatically performs certain actions to be performed on the Bitcoin blockchain. Upgrading Taproot would also reduce the block space required by transaction data, this is done by compressing the data associated with multisig transactions. Since smart contracts by their nature involve multisig transactions, the upgrade would significantly improve the capacity of Bitcoin smart contracts. In anticipation of this upgrade, the Bitcoin Lightning Network protocol, a Layer 2 protocol that facilitates peer-to-peer transactions, has more than doubled its capacity since June 2021.

Ethereum (ETH) prepares to don the mantle of crypto leadership

This brings us to the crux of the matter. The ongoing Bitcoin rally is expected to reach an ephemeral plateau after the Taproot upgrade, paving the way for a leadership transition to Ethereum.

Source: https://www.tradingview.com/chart/?symbol=BINANCE%3AETHBTC

ETH / BTC is now near two areas of high demand, depicted in red and blue colors in the chart above. From a technical analysis perspective, this development paves the way for outsized gains in Ethereum.

On the fundamental front, Ethereum is expected to undergo some major changes in the coming months. First, Optimisms Optimistic Ethereum (OE), a Layer 2 solution designed to meet the scalability challenge of Ethereums, is now ready for a major overhaul. As a reminder, OE helps Ethereum perform off-chain calculations, only publishing on-chain transaction data. This has the potential to reduce Ethereums gas fees by up to 100 times, paving the way for the adoption of smart contracts. OE is now slated to undergo the OVM 2.0 upgrade on October 28. This upgrade would make Optimism 100% compatible with an Ethereum Virtual Machine (EVM). In essence, DApps or smart contracts will now be deployable on OE without undergoing any code changes.

Keep in mind that Goldman Sachs expects Ethereum to eventually overtake Bitcoin, as the open source blockchain offers much more utility than its much larger counterpart. While this does not happen until the launch of Ethereum 2.0, the factors mentioned above support significant upside potential in the meantime. As a reminder, Ethereum 2.0 will incorporate two fundamental changes, sharding and staking. Under the sharding, the Ethereum blockchain will be split into separate fragments. Each shard would act as an independent blockchain, hosting its own blocks of smart contracts and transaction validators. Ethereum 2.0 will also abandon Proof of Work (mining) in favor of a Proof of Stake (staking) mechanism, where instead of spending computing power in the form of cryptographic calculations based on the hash rate in order to to forge a consensus, the miners simply stake out or lock a certain amount of aether in the master nodes. The reward for processing the transaction will then be distributed based on the amount of Ether put into play by an authenticator. These two major changes will increase the processing power of Ethereum networks to around 100,000 transactions per second while significantly reducing its energy footprint.

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