Fortunes change quickly in the crypto market. Case in point: Ethereum (ETH +4.08%) has gone from a down year to one of the hottest cryptocurrencies in a matter of weeks. It's up 65% over the last month at the time of this writing (July 22), far outpacing market leader Bitcoin (BTC +2.54%).
Here's a look at the catalysts that have led to massive gains for Ethereum -- and why it could continue to go even higher.
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1. Ethereum ETFs are seeing record inflows
The SEC approved the first spot Ethereum ETFs last year, and while they've been successful so far, they really started to take off in the last few weeks. Ethereum ETFs passed their 12th consecutive day of positive inflows on July 21, accumulating $3.5 billion in total net inflows over that period.
Bitcoin ETFs, on the other hand, ended a 12-day streak of positive inflows on July 21. And during that time, there were several days when Ethereum ETFs had higher daily inflows than Bitcoin ETFs.
These ETF inflows are an indicator of growing interest in Ethereum from institutional investors. Institutional capital has been a key factor in Bitcoin's bull run, and it could do the same for Ethereum.
2. Companies are adding Ethereum to their treasuries
Businesses are now buying cryptocurrencies for their corporate treasuries. Bitcoin is the cryptocurrency of choice, as there are currently 40 publicly traded companies holding it, according to CoinGecko. Combined, they hold 4% of the total Bitcoin supply, with a value of $100 billion.
But Ethereum is gaining ground among companies that want to have cryptocurrency on their balance sheets. Ten companies are holding a combined $3 billion in Ethereum, including Coinbase, which has about $430 million. Even Bitmine Immersion Technologies, a Bitcoin mining company, has $1.1 billion in Ethereum.
The amount of Ethereum held by public companies is still fairly small at less than 1%, so there's plenty of potential growth.
3. It's the most popular blockchain ecosystem
Ethereum was the first major blockchain platform with smart contract functionality, giving developers a place to build decentralized apps (dApps) and create new crypto tokens. While many other blockchains have since emerged as competitors to Ethereum, its first-mover advantage has been tremendous.
One way to evaluate the success of a blockchain is the total value locked (TVL) into its smart contracts and protocols. Ethereum's TVL is $82 billion, which is 59% of the TVL in the entire crypto market. What's most impressive is how Ethereum has largely been able to maintain its position even with increasing competition. It has generally been responsible for about 50% to 60% of the crypto market's TVL for over three years.
CRYPTO: ETH
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4. Ethereum is also the top blockchain for stablecoins
Stablecoins, which are cryptocurrencies tied to a fiat currency, have been a hot topic lately. The U.S. passed its first major piece of cryptocurrency legislation, the Genius Act, earlier this month, and it specifically deals with stablecoin regulations. The total combined market cap of stablecoins is on the rise and is now over $250 billion.
Stablecoins are issued on blockchain networks, and Ethereum is the most common choice. It's responsible for about half the total stablecoin supply -- some $130 billion. The largest stablecoins operate on Ethereum, including Tether, USDC, and Dai.
Since they maintain a consistent value, stablecoins are widely used and have high trading volumes. They also generate substantial transaction fees, and no blockchain benefits more than Ethereum. Over the last year, it has made over $6 billion in fees from Tether alone.
5. It's seen as a more affordable alternative to Bitcoin
Bitcoin and Ethereum aren't direct competitors. Bitcoin is a store of value, while Ethereum is a smart contract blockchain, so they serve two very different roles. But some crypto investors look at Ethereum as an alternative to Bitcoin, particularly when they worry that the latter has gotten overvalued.
That could be driving investments in Ethereum, along with the reasons above. Bitcoin costs about $120,000 and has a market cap of $2.4 trillion. A common question on crypto forums nowadays is whether it's too late to invest in Bitcoin.
Ethereum costs about $3,700 and has a market cap of $450 billion. It also hasn't grown nearly as much as Bitcoin until recently. While both have their merits as crypto investments, there's an argument to be made that Ethereum could have more room to grow at its current value.
