Ethereum (ETH) has witnessed substantial support from institutional investors who played a significant role in propelling the Bitcoin rally of 2021. Recognizing the potential use cases of cryptocurrencies in the future, institutional investors like JPMorgan, Ark Invest, MicroStrategy, Tesla, and Andreessen Horowitz, among others, embraced Bitcoin and other digital assets. Interestingly, these institutional investors are now displaying a greater preference for Ethereum over Bitcoin, indicating a shift in their investment focus.
Ethereum Gains Institutional Investor Preference
As the Ethereum Merge and Shanghai upgrade occurs, the narrative surrounding Ethereum surpassing Bitcoin gains further momentum. Traders anticipate comparatively smaller fluctuations in Ethereum compared to Bitcoin soon.
The volatility index of ETH over 30 days is currently lower than that of Bitcoin. Additionally, the historical volatility of Ether relative to Bitcoin over 180 days has experienced a significant decline since 2020, as reported by Bloomberg.
Due to the lower volatility observed, institutional investors are finding increased interest in investing in ETH rather than BTC. Lower volatility tends to allow institutional investors to allocate more capital toward cryptocurrencies. Furthermore, long-term investors are more inclined to expand their exposure to ETH.
The implied volatility indexes of Bitcoin and Ether are derived from options pricing. While both indexes experienced a decline from their recent peaks in March, the Ethereum index exhibited a more significant drop.
According to Richard Galvin, co-founder of Digital Asset Capital Management, implementing the Shanghai upgrade in April is expected to increase ETH staking yields, subsequently reducing volatility. However, the U.S. Securities and Exchange Commission (SEC) considers Ethereum a security. SEC Chair Gary Gensler believes that Ethereum’s transition to a proof-of-stake (PoS) consensus mechanism has transformed it into a security.
At the same time, the Bitcoin blockchain is influenced by Bitcoin ordinals, non-fungible tokens (NFTs), and meme coins. Additionally, the correlation between the prices of Bitcoin and Ethereum has reached its lowest point since 2021.
ETH and BTC Price Movement
ETH maintains its trading position above $1800, defying the influence of numerous macro factors, regulatory challenges, and the imminent US debt ceiling crisis that has significantly affected the global market. The price of ETH stands at $1818, exhibiting a 0.16% increase in the past 24 hours.
BTC faces the potential risk of dropping below the $25,000 mark. Within the last 24 hours, the price of BTC has experienced a 0.15% decline, with the lowest and highest points recorded at $26,549 and $26,986, respectively.
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