The positive tumult in the cryptocurrency market continues, with new developments that experts are struggling to make sense of happening seemingly by the day. Bitcoin still remains some 20% off from its $65,000 high after two massive selloffs. For those focused solely on the top token, the price action in BTC perhaps leaves something to be desired. Yet the altcoin market is experiencing a boom unlike any seen before, and it’s hard to not see the positive side of Bitcoin’s current rut.
Priced at around $55,000, bitcoin makes for a very lofty token. Its massive valuation relative to other cryptos has recently finally made way for a relative disconnection between BTC and the altcoin market, where other coins are no longer uniformly sharing gains and losses as used to be the case. In short order, ether went on to post one all-time high after another, with $3,500 being the latest.
With countless developments surrounding the project, ether has attracted plenty of investors and traders. Recently we’ve seen a Euro digital bond planned for the Ethereum network, and incredible growth in DeFi (which is virtually all based on Ethereum technology). After climbing to $3,500 from a few hundred dollars in less than a year, ether has become a significant player in the cryptocurrency marketplace (currently 17% of the total crypto market cap, compared to bitcoin’s comfortable lead of 45%).
Recently, though, watching all the action in the altcoin market, we’ve started to wonder whether all the buzz over ETH might have had unintended consequences…
Someone has taken a look at Ethereum Classic, and based on the evidence, really liked what they saw.
Why are there two Ethereums anyway?
The fork between ETH (ether, the crypto associated with the Ethereum network) and ETC (Ethereum Classic) is the result of a community disagreement. Like bitcoin, ETC has a fixed supply released by mining. It suffered a coordinated hack in 2020 which revealed apparent security flaws that damaged its credibility. Recently, though, on May 5 the ETC hash rate was up to pre-hack levels (which substantially increases security) and its price skyrocketed, up 333% over the last seven days.
Like ether? You’ll love Ethereum Classic!
While ETC does benefit from being one of the handful of cryptocurrencies featured on Robinhood, nobody’s sure what exactly is behind the price explosion.
Looking at ETC performance beside bitcoin and ether, well, there’s just no comparison:
CoinMarketCap
So what’s going on?
There are a few theories.
Robinhood: Decrypt is pretty sure that ETC got caught up in the dogecoin hype, and that its recent surge is another /WallStreetBets fad (like GameStop and silver). Robinhood does let its customers trade ETC among the handful of cryptocurrencies can access on the platform. Possible.
Grayscale: Cointelegraph accepts the WSB hypothesis and layers on another possibility: institutional whale Grayscale, who’s been adding millions to its Ethereum Classic Trust (ticker symbol ETCG).
It’s just plain better: To true believers, Ethereum Classic should not have any less of a price tag than ETH. Yet the framework behind ETC, while sturdy enough, is nowhere near as robust or established as that of thoroughly-embedded Ethereum. While EtherPlan does try to explain this “ETC Is just better” perspective, it basically comes down to a simple argument: only ETC offers proof of work, programmable smart contracts, and a finite number of coins.
Only time will tell if this is in fact correct. Based on this perspective, though, we’d also have to hypothesize that all the money flowing into ETC over the last few days has just been waiting for the bugs to get worked out. That seems unlikely.
DeFi: Reuters points to the massive DeFi boom with the added legitimacy of the European bond issue planned on the Ethereum network. But these two developments, while absolutely important, shouldn’t affect the value of ETC. Unless perhaps buyers are just confused…
Is this a “use Signal” moment?
Remember back in January when Elon Musk tweeted, “use Signal,” and a completely unrelated company (Signal Advance)’s stock went 12x in two days?
Might that be what’s happening? What if a huge number of crypto-curious people finally got tired of hearing how much money everyone was making. What if they opened up PayPal (or Robinhood or even their brokerage account) and searched for bitcoin?
Here’s how this “use Signal” theory works:
- Our aspiring crypto investor searches for bitcoin
- They see it’s really expensive
- So they do a little research and discover something called Ethereum
- So they search for Ethereum and find not one but two different cryptocurrencies
- They buy the less expensive one (that’s a no-brainer!)
- And pat themselves on the back for saving $3300 per coin
Of course there’s no way to prove this theory. Very few people are going to admit making a mistake (ignorance is bad enough, but financial ignorance is perceived as particularly shameful for some reason). If we take a look at Google Trends for relevant searches, we see what looks like a strong correlation between ether-related searches (blue, yellow) and ETC searches (red, green):
Maybe investors like the idea of owning a whole coin rather than just a fraction of one.
There’s another, more interesting story that is also about price and doesn’t assume naivete…
When crypto began buzzing in October 2020, bitcoin was sitting at around $12,000 with ETH at around $350. For the price of one bitcoin, an investor could have bought nearly 40 ETH. That October investor who made that purchase is sitting on either a 3.5x or a 9x return on investment.
But both BTC and ETH prices are big numbers now. Maybe today’s ETC buyers look at its price and consider how much farther from zero both bitcoin and ether’s price are. Maybe the lower per-coin price really is what’s so attractive. If the theory all successful cryptocurrencies’ prices will eventually go to the moon is in fact true, ETC is just barely leaving the launch pad.
Guess a lot of people think it’s not too late to buy a ticket.
