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The Ethereum rate has outperformed Bitcoin. What is behind the growth and why is XRP price volatility not expected to decrease?

The second largest cryptocurrency by capitalization, Ethereum (ETH), reached $3,100 on the Binance exchange for the first time since April 2022. Over the course of a day, the coin increased in price by about 3%, and over a week – more than 7%. Ethereum has outpaced Bitcoin (BTC) for the second week in a row. The ratio of the ETH price to the cost of Bitcoin increased over the past day by almost 5%, reaching 0.06.

According to Standard Chartered Bank, the price of ETH could rise to $4 thousand on expectations of the approval of spot exchange-traded funds (ETFs) on Ethereum in the United States, similar to what it was for Bitcoin. Analysts at brokerage Bernstein predict that the likelihood of such an ETF being approved by regulators before May is approximately 50%. They predict the likelihood of final approval within the next 12 months. Lawyer Scott Johnsson, who tracks activity around spot cryptocurrency ETFs, believes that the US Securities and Exchange Commission (SEC) could follow the schedule for reviewing exchange-traded funds for Bitcoin and approve a spot ETF for Ethereum if not in May 2024, then by mid-2025 . Bloomberg ETF market analyst James Seyffart clarified that the fund approval process will not require the same time commitment as it did for Bitcoin, and can be quickly deployed on an existing foundation.

Experts from the investment company Astol Advanced Limited (Hong Kong) clarify that the demand for Ethereum is also supported by the anticipation of the upcoming Dencun update, which will introduce several important technical changes to improve the efficiency of the Ethereum blockchain. “Optimistic sentiment regarding the coin dominates, and therefore the rally for ETH may continue. The next significant level for ETH will be $3,500. The upper resistance level in the coming month is seen at $3,800, because this is 80% of the historical maximum,” commented the CFO of the ASTL investment project Konstantinas Sizovas.

In addition, over the past 4 months, the number of active crypto wallets for MetaMask, the most popular wallet for Ethereum, has increased sharply. In September 2023, their number was estimated at 19 million, and in January – already at 30 million.

The Bitcoin exchange rate has not shown any noticeable volatility over the past 24 hours. After the price of the first cryptocurrency approached $53 thousand, it fell below $52 thousand and has been trading in a narrow price range for several days.

As for Ripple, the Ripple CTO does not expect XRP price volatility to decrease. David Schwartz recently dismissed the idea that automated market makers (AMMs) on the XRP Ledger (XRPL) could significantly reduce XRP price volatility in the near term. Despite the introduction of AMMs and their theoretical ability to reduce volatility through mechanisms such as collecting volatility data and providing additional liquidity, Schwartz believes that the overall impact on XRP price fluctuations will be minimal. Previously, Schwartz detailed Ripple’s strategy for using AMM for Ripple payments, with a particular focus on institutional transactions. The goal is to leverage the liquidity provided by AMMs on a DEX (Decentralized Exchange) to facilitate institutional payments, which in turn could help rebalance AMMs and reduce volatility. In theory, this approach could help reduce market volatility by more efficiently utilizing liquidity on XRPL, but Schwartz was frank about the limitations and current extent of DEX trading activity. He noted that while Ripple is exploring the use of DEX for institutional payments, this was not the main motivator for developing the AMM feature, but acknowledged it as a useful by-product.

XRP Ledger’s significant move towards AMMS integration ran into trouble as key validators withdrew support after a bug was discovered. This development poses a serious threat to the success of the amendment, which previously received an 85.7% approval rating among validators. The failure has caused concern among the XRPL community and led to calls to reconsider the proposal. The amendment aims to introduce liquidity pools into XRPL, facilitating decentralized trading and liquidity provision similar to other leading DeFi platforms.

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