Second-tier cryptocurrency Ethereum appears to have found a foothold in the near-term as the asset sees a surge in capital inflows.
Between March 20th and March 27th, Ethereum’s market cap has gained around $31 billion, from $346.7 billion to $377.1 billion, amid anticipation of the Proof of Stake (PoS) upgrade.
Market Cap of Ethereum in USD; Last 7 days. Source: CoinMarketCap.com
Although the market will be watching to see if recent gains continue, Ethereum has sustained capital inflows for two weeks. Bullish sentiment was sparked from March 15 following the successful launch of the Ethereum “merge” on the Kiln testnet, with pundits attributing the upgrade to the rally.
PoS will allow investors to stake Ether, a capability that will likely attract more players to the platform. In addition, the PoS protocol will significantly reduce Ethreum’s power consumption and have greater appeal for institutional investors concerned with environmental, social and governance (ESG).
Notably, the asset has eclipsed Bitcoin over the same period that has seen fluctuations in market cap.
Drivers for interest in Ethereum
According to Aya Kantorovich, Head of Institutional Coverage at FalconX, the excitement surrounding the upgrade is driving interest in Ethereum.
Aside from the upgrade, Kantrorovich also linked the growth to other market activity such as the Bitcoin bull market.
She explained that capital inflows could also result from hedge funds and retail investors taking their share of profits from Bitcoin and transferring them to Ethereum.
Additionally, Kantorovich noted that despite bitcoin trading in the shadow of Ethereum, the number one cryptocurrency is seeing a drop in volatility.
She explained that institutional players are now influencing the price of bitcoin, hence the recent trading in correlation with stocks.
“And so we’re seeing this volatility drop that really needs mass adoption, both with what we’re seeing on the desk. You are beginning to see that bitcoin trading is very similar to some assets in traditional finance. In general, there is more liquidity in the markets and the price of bitcoin is determined by institutions,” she said.
Although Ethereum currently occupies a smaller market share, some analysts believe that the advancement of the blockchain will enable it to outperform Bitcoin. Overall, Bitcoin’s market dominance is a key aspect to monitor, with the metric hovering at just over 40%.
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