After rising 13% in two days, Bitcoin’s market capitalization (BTC) topped $ 800 billion, its highest level in 79 days. Over the same period, Ether (ETH) returned 45% in two weeks, putting the network’s market cap at $ 340 billion.
Positive expectations of the London hard fork and its potential deflationary impact undoubtedly played a role, but some investors continue to question how Ether compares to Bitcoin. Some, including Pantera Capital CEO Dan Morehead, expect Ether to overtake Bitcoin as the largest cryptocurrency.
Market participants may also have been excited after Minneapolis Federal Reserve President Neel Kashkari suggested that the Fed hold on to the asset purchase program a little longer. The reason given was the spread of the delta variant and its potential damage to the labor market.
“Delta could discourage people from returning to jobs that require face-to-face interaction and keep children away from schools.”
A longer extension of the stimulus increases the risk of inflation, which increases the attractiveness of scarce assets such as real estate, commodities, stocks and cryptocurrencies. However, the impact of these macroeconomic changes should impact Bitcoin and Ether alike.
Active addresses give Bitcoin a clear head start
Comparing some of Ethereum’s metrics could shed some light on whether Ether’s 58% discount is justified. The first step should be to measure the number of active addresses, except for small amounts.
Addresses with a balance of $ 1,000 or more. Source: CoinMetrics
As shown above, Bitcoin has 6 million addresses worth $ 1,000 or more, and 3.67 million have been created since 2020. Meanwhile, Ether has 2.7 million addresses with $ 1,000 less than half. Altcoin growth has also been slower, with 2.4 million of them created since 2020.
That metric is 55% lower for Ether, and this confirms the market cap gap. However, this analysis does not include how much large customers have invested. While there isn’t a good way to guess this number, measuring cryptocurrency products traded on the exchange could be a good guide.
Ether is lagging behind in exchange-traded products
Publicly traded crypto products. Source: Bloomberg and Investing.com
After aggregating data from multiple exchange-traded instruments, the result is revealing. Bitcoin dominates with $ 32.3 billion in assets under management, while Ether is $ 11.7 billion. Grayscale GBTC plays a key role in this discrepancy as the product launched in September 2013.
Meanwhile, Ether’s first publicly traded product hit the market in October 2017 when the XBT provider Ether Tracker launched. This difference explains in part why the total of Ether is 64% lower than Bitcoin’s.
Futures open interest justifies the price gap
Finally, one should compare the data from the futures markets. Open Interest is the best metric for a professional investor’s actual position as it measures the total number of contracts marketed by market participants.
An investor could have bought $ 50 million worth of futures and sold the entire position a few days later. This trading volume of US $ 100 million does not currently represent a market risk; therefore it should be neglected.
The aggregated open interest of Bitcoin futures. Source: Bybt
Open interest for Bitcoin futures is currently $ 14.2 billion, up from a high of $ 27.7 billion on April 13. The Binance exchange leads with $ 3.4 billion, followed by FTX with another $ 2.3 billion.
Ether futures aggregate open interest. Source: Bybt
On the flip side, open interest in Ether futures peaked at $ 10.8 billion about a month later, and the indicator currently stands at $ 7.6 billion. Hence, it is 46% lower than Bitcoin’s, which further explains the valuation discount.
Related: Ethereum’s market cap reaches $ 337 billion, outperforming Nestle, P&G, and Roche
Other metrics like on-chain data and miner revenue show a more balanced situation, but both cryptocurrencies have different use cases. For example, 54% of Bitcoin supply has remained untouched for more than a year.
The truth is that every indicator has a downside and there is no definitive rating metric to determine whether a cryptocurrency is above or below its fair value. However, the three metrics analyzed suggest that the upward trend in Ether, when priced into Bitcoin, will not signal “flipping” anytime soon.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You should do your own research when making a decision.