Ether is ready to take the limelight in the month ahead after bitcoin and newly launched bitcoin exchange-traded funds dominated crypto investor attention in January. Both bitcoin and ether are on pace to finish the month higher by 0.01%, according to Coin Metrics. January saw sharp price swings driven first by hype before the launch of the first spot bitcoin ETFs in the U.S., and subsequent flows into and out of the funds after they began trading Jan. 11. By now, the outflows have tapered off and bitcoin’s outlook for the year is still strong, boosted by the upcoming halving and the potential for rate cuts. As investors came to expect slow, steady flows into bitcoin through newly institutionalized ETFs in coming months, ether and altcoins have been ready for a breakout. “Short-term flow has been dominated by GBTC [Grayscale Bitcoin] sales. … As that flow is easing, the market has found its footing and the reality of a world where large asset managers promote crypto actively is starting to hit home,” said Darius Tabatabai, co-founder at decentralized exchange Vertex Protocol. “ETH and the alts are acting as high beta plays on this trend and our expectation is that both will outperform as more focus starts to direct towards ETH rolling out upgrades to [the Ethereum network] … as well as a potential ETF approval.” February is a historically strong month for both bitcoin and ether. Bitcoin has finished nine of the last 11 Februarys in the green and has had an average return of 13.12% for the month, according to CoinGlass. Ether has finished the month higher in six of the last seven since its inception, giving it an average February gain of 12.97%. Soon after the U.S. Securities and Exchange Commission approved spot bitcoin ETFs for trading, investors took profits and rotated into ether, pushing it to a 20-month high as they looked ahead to what might come next. The SEC is due to give decisions on spot ETH ETF applications beginning in May. BlackRock, Invesco, Ark and VanEck are among the firms in line for approval, as well as Grayscale, which is seeking to convert its existing Ethereum Trust (ETHE) into an ETF. Standard Chartered said in a note this week that ahead of the May decision, it expects ether to track or outperform bitcoin’s pre-ETF uptrend in the comparable period. If it does, it could reach $4,000 by then, the bank added, which would equal a roughly 70% increase from current levels. “Bitcoin remains the more popular macro asset with cross-over appeal to traditional finance, and Solana is gaining popularity as a faster and cheaper alternative to Ethereum,” said Jeff Dorman, chief investment officer at crypto asset manager Arca. “Nonetheless, Ethereum is not going away anytime soon, and it could even compete with Bitcoin if an ETF is approved, or if bitcoin investors realize they want exposure to areas of blockchain’s growth that Bitcoin doesn’t offer, such as stablecoins, NFTs, [decentralized finance], gaming [and] AI.” Ethereum is continually improving and upgrading , Dorman added, which will help the network grow in line with cheaper and faster alternatives such as Solana. Its next big update, called “Dencun,” is expected to take place in February and is meant to make transactions on so-called Layer 2 solutions — networks that sit on top of a base network like Ethereum and exist to provide extra capacity and functionality to the network — less expensive. Ether is also poised to benefit from the popularity of altcoins , many of which run on top of the Ethereum blockchain, according to Jason Urban, the global head of trading at Galaxy Digital. “We’ve seen an uptick in alt interest. … ETH is probably more poised to benefit from that” than bitcoin, he said. “There are going to be people that will manifest that play, especially more [traditional finance] people that might not have access or the ability to trade a bag of alts. You’ll see that manifest in ETH.” For January, ETH is heading to a less than 1% gain, while other alts are a mixed bag. Since Jan. 23, however, when bitcoin fell below $40,000 for the first time this year, they’ve rallied, while ETH has been stagnant. ETH is weaker during that period, while SOL has gained 14%, Polygon’s MATIC rose 4% and the tokens tied to Chainlink and Cardano advanced 4% and 3%, respectively. “If you believe in a bullish market trend like in 2020 and 2021, then it makes sense to invest in the ‘fastest horse,’ which are the smaller and cheaper blockchains and applications,” Dorman said. — CNBC’s Michael Bloom contributed reporting.
