Why Ether Dominance is Outpacing Other Altcoins in the Market: Insights from On-Chain Data

In recent years, the cryptocurrency market has seen a surge in the number of altcoins available for trading. While Bitcoin remains the dominant player in the market, other cryptocurrencies such as Ethereum, Litecoin, and Ripple have gained significant traction among investors. However, in recent months, Ether dominance has been outpacing other altcoins in the market. This article will explore why Ether dominance is on the rise and provide insights from on-chain data.

Firstly, it is important to understand what Ether is and how it differs from Bitcoin. Ether is the native cryptocurrency of the Ethereum blockchain, which is a decentralized platform that enables developers to build decentralized applications (dApps). Unlike Bitcoin, which is primarily used as a store of value and a means of payment, Ether is used to power transactions on the Ethereum network. This means that Ether has a more practical use case than Bitcoin, which has contributed to its growing popularity.

One of the main reasons why Ether dominance is outpacing other altcoins in the market is due to the growth of decentralized finance (DeFi) applications. DeFi refers to a set of financial applications built on top of the Ethereum blockchain that enables users to access financial services without the need for intermediaries such as banks. These applications include decentralized exchanges (DEXs), lending platforms, and stablecoins.

According to data from DeFi Pulse, the total value locked (TVL) in DeFi applications has grown from less than $1 billion in June 2020 to over $60 billion in May 2021. The majority of these applications are built on the Ethereum blockchain, which has led to an increase in demand for Ether. As more users interact with DeFi applications, they need to pay transaction fees in Ether, which has contributed to its growing dominance in the market.

Another factor contributing to Ether dominance is the growing popularity of non-fungible tokens (NFTs). NFTs are unique digital assets that are stored on the Ethereum blockchain. They have gained significant attention in recent months, with high-profile sales such as Beeple’s “Everydays: The First 5000 Days” selling for $69 million at Christie’s auction house. The majority of NFTs are bought and sold using Ether, which has contributed to its growing dominance in the market.

On-chain data also provides insights into why Ether dominance is outpacing other altcoins in the market. According to data from Glassnode, the number of active addresses on the Ethereum network has been steadily increasing since the beginning of 2021. This indicates that more users are interacting with the Ethereum network, which has contributed to the growing demand for Ether.

Furthermore, data from CoinMetrics shows that the number of daily transactions on the Ethereum network has surpassed that of Bitcoin. In May 2021, the average daily transactions on the Ethereum network were over 1.5 million, while Bitcoin had an average of 300,000 daily transactions. This indicates that the Ethereum network is being used more frequently than Bitcoin, which has contributed to Ether dominance in the market.

In conclusion, Ether dominance is outpacing other altcoins in the market due to its practical use case in powering transactions on the Ethereum network. The growth of DeFi applications and NFTs has also contributed to its growing popularity. On-chain data provides insights into why Ether dominance is on the rise, with an increase in active addresses and daily transactions on the Ethereum network. As the cryptocurrency market continues to evolve, it will be interesting to see how Ether dominance evolves and whether other altcoins can catch up.

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• Source: Plato Data Intelligence.