Ethereum, the second-biggest digital currency by market capitalization, is on fire right now, setting new record peaks on a regular basis. The European Investment Bank’s announcement that it would issue $121 million in crypto bonds on the Ethereum public blockchain was the essential catalyst that sparked a raging demand.
Ethereum has been active in drawing the interest of institutional investors and business treasuries, as per a new report by Two Prime, a digital assets investment adviser. This is due to its vibrant developer culture, rapidly rising DeFi network, and exposure to the liquid derivatives industry, as per the study.
“Based on our analysis of ETH’s price performance, derivatives markets, and on-chain data, we believe that ETH has earned a place, alongside BTC, as an institutional-grade investment, store of value, and treasury reserve asset,” Two Prime stated.
The value of Ethereum, which is presently traded near $2,900, has increased by over 900 percent in the last year.
Given this, Two Prime claims Ethereum is deeply underappreciated in comparison to Bitcoin, which has a market capitalization of over $1 trillion. “ETH on the other hand, which began attracting institutional investment in early 2021, has seen its market capitalization grow to reach $275 billion, still just 25% that of BTC,” according to the study.
Ethereum is a leading open source technology venture with the opportunity to change the financial future. Though BTC is still the most prominent cryptocurrency for beginners, ETH is gaining traction.
Grayscale, the world’s largest crypto investment management company, owns over 3.2 million ETH, accounting for approximately 3% of the overall supply. This limits the total supply of available Ethereum, putting upward market pressure on the currency.
In the digital currency market, out-of-the-money (OOTM) put options are being used to hedge long-spot bets, indicating that institutional players are entering the industry. Option volume (the number of contracts exchanged everyday) and open interest (the number of active contracts) have also risen, indicating that Ethereum is being more widely adopted by institutions.
“The growth of both futures and option markets have moved beyond mere retail speculation as institutional money managers have moved in to start hedging net long portfolios against outsized volatility events”, according to Two Prime wrote.
As per the report, although overall open interest in ETH was just $365 million in April 2020, it had grown to over 20x by April 2021, hitting $7.5 billion.