- Ether’s price has surged recently compared to Bitcoin, largely due to increased use in DeFi and NFTs which is boosting demand
- Ether supply held on exchanges is at an all-time low as more is locked up for DeFi, reducing available supply
- Analysts expect ether’s utility in DeFi and NFTs to continue driving demand growth in excess of supply growth for years
Ether’s price has soared recently, significantly outperforming Bitcoin. A key reason is ether’s increased use in decentralized finance (DeFi) and non-fungible tokens (NFTs), according to analysts at Bernstein.
DeFi and NFT Demand Boosting Ether
The amount of ether held on exchanges is at an all-time low of 11%, a sign that more of the cryptocurrency is being locked up for use in DeFi protocols, the analysts said in a note Tuesday. That’s helping reduce the ether available for trading.
“Ethereum is rapidly becoming the settlement layer for a new digital economy — an economy where assets are tokenized and where those tokens are used as collateral in a range of lending and derivative products,” the analysts wrote.
Lower Exchange Supplies
By contrast, Bitcoin’s supply held on exchanges hasn’t changed much, at around 14% recently versus 13% a year ago, according to Bernstein.
The analysts said they expect ether’s increasing utility in DeFi and NFTs to continue to support demand growth in excess of supply growth, “potentially for years to come.”
Bitcoin Seen as ‘Digital Gold’
Meanwhile, they said Bitcoin is establishing itself as “digital gold” and they expect its volatility versus the dollar to decline toward that of gold.
Conclusion
Ether’s increasing use cases beyond digital currencies are boosting its price versus Bitcoin, according to analysts. They expect that trend to continue as ether establishes itself as the settlement layer for DeFi and NFT transactions.
