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Crypto markets are still undecided with bulls and bears clashing, but the next few months could be very good for Ethereum (ETH), according to an investor.
Crypto assets rebounded in their range linked channel again today, following the bullish news from El Salvador. However, Bitcoin (BTC) is still down 43% from its all-time high, and market sentiment appears to have turned bearish overall.
Ethereum did not fare as badly with a 39% drop in its peak price to current levels which are around $ 2,580, according to CoinGecko. Usually, the rest of the crypto market dips deeper than bitcoin during these steep declines.
Public markets and seed investor Daniel Cheung have shared their insight into Ethereum’s fundamentals and why he thinks it could outperform bitcoin in the coming months.
ETH and ETH-DeFi will have an unprecedented run over the next few months given: ETH may soon switch BTC on the basis of strong fundamentals.
Bullish fundamentals
The first argument put forward by the investor is that Ethereum’s fundamentals have never been as strong as those of bitcoin. This should cause the valuation spread to narrow, as the market capitalization of ETH increases.
At its peak, Ethereum’s market capitalization reached $ 500 billion. To put that in perspective, it’s the same as bitcoin at the end of December 2020.
As the valuation of ETH rises, this should be a rising tide scenario, and DeFi will benefit the most as it is the fastest growing sub-sector within the ETH ecosystem.
Ethereum is now settling in four times more in gross volume, including stablecoins, than bitcoin, which is driven by the parabolic rise of decentralized finance, he added. DeFi won’t slow down, with major protocols initiating upgrades and implementing Layer 2 scaling.
The investor added that the fundamentals of major lending protocols and ETH return aggregation protocols have been incredibly resilient during this volatile time.
Ethereum also generates much more than bitcoin in terms of transaction fees, which is not so good for users, but it is for the value of the network. Cryptofees are currently reporting that Ethereum generates over 80% more than bitcoin in average seven-day fees.
The story continues
EIP-1559 inbound
The market is also failing to assess the benefits of the EIP-1559, which is expected to launch with the July update in London. While this will not directly reduce gasoline costs when demand is high, it will have an effect on deflation as they are burnt.
The final argument made by Cheung is that institutional investing has never been greater and it is unlikely to slow down given the fundamentals above.
At the time of this writing, ETH had gained 2% that day and was trading at $ 2,540, more than 900% higher than its price at this time last year.
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