Ethereum has climbed over 500% in 2021 significantly outperforming Bitcoin.
The attraction is the ecosystem of applications across DeFi and NFTs on the blockchain that support a positive long-term outlook.
We are bullish with ETH gaining momentum approaching $5,000 and already breaking out as an exchange rate against BTC.
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BackyardProduction/iStock Editorial via Getty Images While Bitcoin ( BTC-USD ) has dominated headlines this year, there is a case to be made that the real action is with Ethereum ( ETH-USD ). Indeed, compared to an impressive near 100% gain in Bitcoin thus far in 2021, Ethereum “Ether” has climbed by over 500%. The attraction is its open-source public blockchain that facilitates an ecosystem with an endless number of use cases and digital applications. Indeed, everything from decentralized finance “DeFi”, to non-fungible-tokens “NFTs”, and several high-profile alt-coins like Shiba Inu ( SHIB-USD ) all exist within the Ethereum platform. We are bullish on Ether and expect more upside through 2022 supported by several positive tailwinds. Bullish on ETH
The first point to highlight is a breakout in Ethereum as a ratio to Bitcoin which has reached 0.08, the highest level in three years. This number is simply the current value of Ether at ~$4,650 against Bitcoin trading at $57,500. In other words, with an expectation that ETH continues to outperform, the exchange rate has room to appreciate higher. In early 2018, the ratio briefly traded as high as 0.12 which would imply a price of $6,900 for ETH assuming BTC remains flat. (source: finviz.com)
The setup here looks particularly attractive considering ETH is still a few points below its all-time high of $4,870 in early November. We see a high probability that $5,000 gets taken out which will represent a milestone. Longer term, an expanding market can send the price significantly higher with a view that the crypto segment is still in the early stages of reaching its potential. (source: finviz.com) Ethereum dApps Ecosystem
We mentioned the ETH ecosystem as likely the most exciting aspect of the outlook supporting a higher market value. The key difference between Ethereum and Bitcoin is the concept that its blockchain is programmable allowing developers to create applications ( dApps ) that are stored and run on the network. The innovation from Bitcoin back in 2009 was the structure of public ledger cryptography while Ethereum was created to improve on the concept.
The growth this year has been spectacular considering the most visible applications being the non-fungible-tokens that have transformed into the hottest buzzword in both finance and pop culture. These are the unique digital items that are stored on the blockchain representing proof of ownership and transaction history. Beyond the simple graphic-based artwork being traded as collectibles, there is an expectation that the concept is expanded into the tokenization of physical items including real estate. Several companies are moving forward with these types of projects. To be clear, while most NFTs are minted on Ethereum, some projects are being built on competing platforms such as Solana ( SOL-USD ) and Cardano ( ADA-USD ). Nevertheless, our take is the momentum in this area supports the outlook for all crypto and digital assets in general while ETH benefits as the leader.
It’s encouraging to see that several major corporations have already embraced the technology which adds to the exposure and credibility of the Ethereum platform. For example, The Coca-Cola Company ( KO ) in July raised $575k in an NFT auction to benefit charity. Nike Inc. ( NKE ) has made headlines with plans on selling virtual goods to brand NFTs possibly with the sale of sneakers. PLBY Group Inc. ( PLBY ), the holding company for Playboy Brand s, is also using the format to leverage its intellectual property. These particular projects are connected with Ethereum.
When we think about NFTs, there is a parallel here with the other big theme in technology which is the “metaverse”. In many ways, NFTs and alt-tokens operating within Ethereum are the first manifestations of the Metaverse potential. Ethereum can play an important role in driving the digital economy accessible on a global scale. It’s still unclear what direction the applications will take over the next several years, but we view ETH as a bet on that future.
We mentioned decentralized finance and a simple way to think about it are opportunities for products and services that can work outside the traditional […]