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Ethereum’s hitting new highs today, becoming the first major cryptocurrency to break out after a two-week pullback in the space.
ETHUSD touched $2,683 today, $37 above its peak on April 22. Meanwhile Bitcoin (BTCUSD) remained about 15 percent below its record high in mid-April.
Ethereum’s strength comes as investors anticipate the introduction of EIP-1559, a technical change that would limit the supply of new tokens. It’s expected to be included in the London Hard Fork upgrade in July.
EIP-1559 would establish “fee burning” to cap fees collected by miners. That would remove tokens from circulation and create scarcity. Its mechanism is very different from Bitcoin’s 21 million limit, but the impact could be similar.
Scarcity is a big deal now because signs of inflation seem to be popping up everywhere. S&P said home prices rose 12 percent in February, their biggest increase in 15 years. Lumber prices are hitting new all-time highs. Copper is back to its previous records from a decade ago. Some investors are looking for stores as value as prices rise, increasing the potential appeal of cryptocurrencies like Ethereum.
Ethereum’s market capitalization was $302 billion on Tuesday afternoon, versus $1 trillion for Bitcoin.
Ethereum’s price relative to Bitcoin also rose to 0.049 yesterday, up from about 0.3 in late March. This ratio, often expressed as “ETHBTC,” is now at its highest level since August 2018.
The price ratio could be important because it may suggest cryptocurrency markets are entering a so-called altcoin season. That’s when smaller digital assets like Ethereum outperform versus the larger Bitcoin.
Another sign of an Altcoin strength today was the drop of “Bitcoin dominance” below 50 percent for first time in nearly three years. Bitcoin dominance Bitcoin’s market capitalization as a percent of the total crypto market. Lower readings indicate investors are favoring smaller cryptos.
Some of those other products include Litecoin and Bitcoin Cash. Both hit new 52-week highs in April but have yet to reclaim their lost ground.
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