MW Ether's not dead yet. Here are 3 ways a second Trump term could help it catch up to bitcoin's rally.

By Frances Yue

Ether may get a leg up if ETFs investing in the cryptocurrency see increased interest under a Trump presidency

While ether's performance has lagged behind bitcoin's so far this year, the world's second-largest cryptocurrency by market capitalization is likely to do some catching up during a Donald Trump presidency, some industry participants said.

Ether (ETHUSD) has risen 50% so far this year, less than the 128% gain seen by bitcoin (BTCUSD), according to Dow Jones Market Data. Ether's growth was also dwarfed by that of its competitor Solana (SOLUSD), which has gone up 133% year to date. While bitcoin has been refreshing its record high and testing $100,000, ether is trading at around $3,422 on Monday, more than 30% away from its all-time high above $4,800 hit in November 2021.

As crypto enters the second phase of a bull market, ether is likely to see a boost, according to Jupiter Zheng, partner of liquid funds and research at Hashkey Capital. Historically, ether has tended to underperform bitcoin in the first phase of a bull market, Zheng said in a phone interview.

Crypto-industry participants often divide bitcoin's performance into four-year cycles, with each cycle having four phases: breakout, hype, correction and accumulation.

This year has represented the first phase of a bitcoin bull market, or the breakout period in the four-year cycle, Zheng noted. Altcoins - or cryptocurrencies other than bitcoin - tend to underperform during such a period but then outperform bitcoin during the hype period, according to Zheng.

Meanwhile, bitcoin dominance, a measure of the relative market share of bitcoin in the broad crypto market, stayed at elevated levels. It reached a local high of 61.5% on Thursday, the highest level since March 2021, according to Dow Jones Market Data.

"If we want to see the altcoin season happen, we will need to see bitcoin dominance reaching a high level and then decline. When that decline happens, altcoins including ether will begin to outperform bitcoin in some time," Zheng said.

Ether may also get a leg up if exchange-traded funds investing in the cryptocurrency see increased interest under a Trump presidency, according to Dessislava Aubert, senior research analyst at Kaiko.

Current ether ETFs do not stake the ether they invest in, which has been a concession by issuers due to the regulatory uncertainty around staking. That has reduced the appeal of ether ETFs to some institutional investors, Aubert said in a phone interview.

Staking is a process where investors lock up their crypto to secure the ethereum blockchain and earn rewards. Staking ether currently generates a return of 3.2%, according to the Ethereum Foundation, which supports the blockchain.

That situation may change, with investors expecting a more positive regulatory environment after Trump returns to the White House, Aubert said.

Ethereum may also become more attractive if the Trump administration is more supportive of the growth of decentralized finance, said Federico Brokate, head of the U.S. business at crypto asset manager 21Shares. Decentralized finance, or DeFi, is an umbrella term for financial services built on blockchains that allow peer-to-peer transactions and eliminate middlemen.

Ethereum is the largest blockchain for decentralized finance in terms of total value locked, with $65.2 billion value locked on it, according to data from DefiLlama.

-Frances Yue

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November 25, 2024 10:17 ET (15:17 GMT)

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