Ethereum Competing with Bitcoin for Growth in 2024
Ethereum has demonstrated strong momentum in the last two months, experiencing a 50% increase and surpassing the $3500 level. This upswing in the altcoin is attributed to the resurgence of the DeFi sector.
Spot ETFs have played a pivotal role in driving crypto market growth over the past five months, contributing to Bitcoin’s increased market share, which now stands at 50%.
Several indicators now suggest an impending altcoin season, a period where alternative coins grow at a faster rate than Bitcoin. For example, following a brief pause, altcoin capitalization has resumed its upward trajectory.
Ethereum, a standout among altcoins, leads the decentralized finance sector in terms of capitalization, active validators and blocked funds (TVL). This year alone, TVL has surged by 54% to reach $46.4 billion.
The resurgence in DeFi is attributed to the popularity of new projects. For instance, the EigenLayer platform has attracted $6.8 billion since the beginning of the year, thanks to the introduction of a novel liquid restaking token (LRT). These LRT tokens enhance the profitability of ETH staking by re-locking funds: users lock ETH and receive platform tokens that can be staked or traded on another platform. This approach introduces associated risks but also boosts returns.
Without resorting to such strategies, the annual yield from staking ETH remains below 4%.
Ethereum’s growth is also influenced by the deflationary nature of the network. Since transitioning to PoS, the circulating supply has decreased by 362k ETH (~$1.1 billion) as a portion of the transaction processing rewards is burned.
Cryptocurrencies involve complexity and carry a high risk of rapid monetary loss due to volatility and changing regulatory landscape. It’s crucial to ensure you understand how cryptocurrencies operate and can withstand the potential high-risk scenario of losing your assets.
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