The price of Ethereum surpasses $3,500 and reaches three-month highs against Bitcoin.

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The second-largest cryptocurrency reaches its highest levels in more than three months against Bitcoin and the US dollar.

Ether (ETH), Ethereum’s native asset, extended its climb on Wednesday, reaching multi-month highs against Bitcoin (BTC) and the US dollar.

For the first time since June 9, the ETH/BTC exchange rate increased 3.13 percent to 0.07475. Meanwhile, bids for ETH/USD rose 3.4 percent to $3,546, the most since May 18, indicating a renewed bullish attitude in the second-largest cryptocurrency market following a three-week sideways consolidation.

 

ETH/USD and ETH/BTC daily price chart. Source: TradingView

Despite the cryptocurrency market’s volatile pricing behaviour, Ether’s price increased. For example, Bitcoin prices have been stalled around $47,000, awaiting a decisive breakthrough move over their psychological barrier level of $50,000.

Similarly, one of Ether’s main rivals, Cardano (ADA), has consolidated sideways following its 100 percent-plus price gain in August, while its market dominance has fallen from 4.54 percent on Aug. 8 to 4.26 percent at the time of writing.

 

Cardano prices vs. its market dominance against all the cryptocurrencies. Source: TradingView

The same period witnessed Ether’s market dominance rising from 18.17% to 19.65%, hinting that Ether attracted capital out of assets with interim overstretched valuations.

Hodling detected

Ether’s run up above $3,500 coincides with a decline in ETH reserves across all exchanges.

Blockchain analytics firm CryptoQuant reported that the amount of Ether held in exchange wallets has declined from 19.45 million on Aug. 18 to 18.75 million on Wednesday.

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However, analysts perceive falling reserves as bullish, arguing that traders primarily withdraw their coins from exchanges because they choose to hold them instead of selling them for other assets.

Ether balance across exchanges drop as ETH/USD rise. Source: CryptoQuant

Furthermore, further positive indicators for Ether pricing have developed as a result of supply crunch predictions.

According to CryptoQuant statistics, more than 6% of Ether’s supply is now locked inside the Ethereum 2.0 smart contract – that is, approximately 7.28 million ETH, worth $25.77 billion at current exchange rates.

Total value staked in Ethereum 2.0 smart contract exceeds $25 billion. Source: CryptoQuant

In addition, a recent Ethereum network update known as the “London Hard Fork” has established a system that burns only a portion of its gas costs. According to data given by WatchTheBurn.com, the Ethereum Improvement Proposal 1559 has eliminated 156,986 ETH — worth over $555 million — from the supply since its launch on August 5.

Demand prospects against supply squeeze

Ether has already risen more than 380 percent in 2021, aided by the developing decentralised finance (DeFi) and nonfungible token sectors. In comparison, Bitcoin has risen 62 percent against the US dollar this year.

Payal Shah, director of stock and cryptocurrency product development at CME Group, remarked that Ether is analogous to DeFi, a sector that allows users to trade, borrow, and lend assets directly to one another without the involvement of central authorities such as banks.

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“Ethereum hosts more than 200,000 ERC tokens, some of which are part of the top 100 largest cryptocurrencies,” Shah wrote in a note published mid-August.

“Together, with the accessibility of DeFi and the draw of better interest rates, more and more retail consumers will likely turn to the DeFi space.”

Data tracker DappRadar reports that the total value locked inside Ethereum-backed DeFi protocols has crossed $100 billion.

Cardano rivalry

But Ethereum is racing against a long list of rivals as it grapples with network congestion and higher fees issues. For instance, Cardano employs a dual-layer design to perform computations and settlements separately, thus solving network congestion issues.

Furthermore, because to its proof-of-stake (PoS) architecture, Cardano consumes almost no energy. Ethereum aims to have fully transitioned to PoS by 2022–2023, giving Cardano and other Ethereum competitors plenty of room to thrive.

In the blockchain space, however, Ethereum has a first-mover advantage over Cardano, which has very few decentralised applications to demonstrate.

“Ethereum is the place to be, already boasting thousands of DApps,” said investment analysts at the Value Trend, adding:

“It simply makes more commercial sense, at the moment, to build an app on Ethereum.”

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