Ether rises 8% as Bitcoin dominance wanes

After long lagging behind Bitcoin (BTC) in terms of price action, Ether (ETH) posted some solid gains on Wednesday, rising 8% to over $3,880 in the last 24 hours.

The price of the second-largest cryptocurrency benefited as $800 million worth of short sellers closed their positions, according to Tom Dunleavy, partner at venture studio Master Global. But it is also benefiting from a capital inflow reminiscent of the 2021 bull market, pointed out James Van Straten, senior analyst at CoinDesk.

Bitcoin dominance peaked at 61.85% on November 21 and has since fallen to 54.84%, Van Straten noted. Solana’s dominance has also waned. “BTC has remained unchanged, so ETH has to catch up,” said Van Straten.

This also explains why so many coins perform so well in the CoinDesk 20 – an index of the top 20 cryptocurrencies, excluding stablecoins, memecoins and exchange coins. While the index itself is only up 1.83% today (weighed down by Bitcoin’s weak 1.52%) rise, Ethereum Classic (ETC), Filecoin (IOU), Polkadot (DOT) and Uniswap (UNI) are up Up 22%, 18%, 17% and 16% respectively in the last 24 hours.

Bitcoin did not react strongly to Federal Reserve Chairman Jerome Powell’s comments at the New York Times DealBook Summit. Powell only briefly touched on inflation, saying the Federal Reserve can afford to tread cautiously in its quest for fiscal neutrality, before CNBC host Andrew Ross Sorkin asked him whether Bitcoin’s rise was due to investor fears about the fate of the US dollar.

“People are using Bitcoin as a speculative asset,” Powell said. “It’s like gold, except it’s virtual and digital. People don’t use it as a means of payment or as a store of value. It is very volatile. It’s not a competitor to the dollar, it’s really a competitor to gold.”

Powell further explained that the integration of cryptocurrencies into the financial system is, in addition to consumer protection, primarily about maintaining the health and stability of the banking system.