Ethereum Outshines Bitcoin as Crypto Market Stages Solid Recovery

Ethereum stars the market recovery trailed by Bitcoin as crypto investors react to the Fed 50 basis points cut.

Ethereum is leading the sustained recovery witnessed across the crypto market following the dovish policy by the US central bank. Leading the upward momentum is ETH, coinciding with a significant uptick in the funding rate for the ether open interest-weighted perpetual futures. Such signifies solid demand for the long positions and sustained traders’ optimism for the ETH price rally. 

Ethereum Triumphs Over Bitcoin

Ethereum surge witnessed since the Fed declared 50 basis points on mid-week triumphs over the Bitcoin rebound. The initial cut in four years appears to fuel ETH’s 16% appreciation relative to the 6% gain by Bitcoin during the same period.

The recent performance portrays renewed investor confidence in the crypto market to reverse the turbulent uncertainty before the Fed decided on the rate cut. The rejuvenated life in crypto extends to the funding rate for ETH perpetual futures that flipped positive since last Wednesday to 0.0082%, per Coinglass data.

Market head at crypto exchange YouHolder Ruslan Lienkha considers the ETH surge to portray bullish market sentiment. The executive warns that such is vulnerable to sudden market correction when external factors change, and optimism turns excessive. 

Lienkha terms the positive funding rate as manifesting the rising demand for ETH-leveraged positions. The market analyst considers such signaling a bullish outlook among ETH holders.  

The analyst observes that funding rates within the crypto market are subject to rising volatility. Nonetheless, Lienkha hardly predicts the vulnerability to long squeeze. 

Lienkha considers that though funding rates suggest medium- to long-term trends within the commodity markets, crypto funding rates are predominantly more volatile. The analyst indicates that short positions expecting long squeezes are currently too risky.

Positive Sentiment in the Derivatives Market

The derivatives market signals a dramatic shift in sentiment, with QCP Capital analysts observing notable gains in the funding rates in leading exchanges. The improving funding rates manifest in the basis yields now more attractive following the Fed rate cut. The analysts indicated such a high level of optimism across the crypto derivatives space. 

The Bitfinex Alpha report on Monday illustrates that altcoins led by Ether outshone Bitcoin since they emerged after six months of suppressed open interest and valuations. The analysts attribute the pronounced uptick to the solid recovery from the extreme depression witnessed in the altcoin valuations and open interest since March 2024. 

Despite the recent rally, Bitfinex analysts acknowledged the rising volatility could spoil the party. The altcoin open interest surpasses the levels before the August 5 risk asset deleveraging event.

The Bitifinex report considers such an aggravating market fluctuation, with open interest surpassing August’s $10.74 billion at $11.48 billion. The report finds such a worrying indicator of likely volatility engulfing the altcoin market. 

Ethereum Transaction Fees Skyrocket

The onset of September saw the average transaction fee fall below $1 for the first time in 4 years. Such rekindles the July 2020 experience before the proof-of-stake Merge and blob upgrades. The past weeks have seen the transaction fee spike to $3.52 – above a threefold value of $0.85 at the onset of September 1. 

The Ethereum burn rate rose 1600% in three weeks, from 80.27 ETH to 1360 ETH as of Saturday, September 21. The ETH transactions involving USD Coin (USDC) and USDT stablecoins joined the top gas-consumption list. 

The transaction fees and burn rate hike hardly saved the active accounts from plunging, with the seven-day moving average hitting the floor. The year-to-date value dipped 11% to set the lowest value for the 385,000 accounts. 

The largest altcoin by market value has been facing renewed scrutiny recently, particularly as the ETH-BTC market cap plunged to its lowest value since 2021. Bitwise chief investment executive Matt Hougan indicated that Ethereum appears unattractive, though he considers it a contrarian bet. 

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