Even though the crypto sector expanded in the third quarter, Bitcoin's momentum appears to be waning as big investors shift their gaze towards platforms focused on DeFi and coins like Ethereum.
The comprehensive crypto-services firm, Genesis, has recently unveiled its insights from the third quarter of 2021, emphasizing major market developments. Data indicates a downtrend in Bitcoin demand, while DeFi and altcoins capture the interest of institutional investors.
Institutional Shift to Cryptos
In the past decade, Bitcoin has sparked plenty of debate and has exerted a profound influence on international finance.
As cryptocurrencies solidify their role in the financial evolution that the information age demands, Bitcoin has also introduced significant market volatility.
One observation from Genesis highlights that fewer spread-trading opportunities are partly responsible for the declining interest.
The crypto landscape underwent notable transformations in the second quarter, visible in the reduction of leverage trading options. For instance, Binance, a leading exchange, capped leverage to 20 times for new accounts opened within 30 days.
“The first quarter of 2021 revealed a drop in Bitcoin's share of our total holdings, driven by scarce BTC-focused trading prospects. Although this trend paused in the second quarter, it picked up again in the third quarter, due to persistent inversion in the GBTC premium and flattening of the basis curves,” states the report.
Another contributing factor to the institutional shift away from Bitcoin has been the stringent crypto regulations imposed by China. However, there is a silver lining with favorable views on the introduction of the first U.S. Bitcoin futures ETF.
Exchange-Traded Funds (ETFs) offer investors a way to diversify their portfolios without owning the underlying assets, providing a straightforward alternative to trading individual assets, which won't solely boost earnings but also help curtail losses.
A Bitcoin ETF mirrors the market value of Bitcoin, permitting investors to enter the scene without navigating complex buying processes.
Moreover, ETF participants sidestep the direct involvement in Bitcoin, sparing them the headache of crypto security and storage logistics.
Ethereum appears poised for further growth.
The rise of DeFi and the sensational interest in NFTs have spurred increased institutional participation with regards to Ethereum.
According to recent findings, there is a documented surge in institutions joining the DeFi environment, exhibiting keen interests in ETH-based lending and borrowing across diverse decentralized apps (DApps).
The report states,
“As engagement in ETH-driven lending grew, alternative coins, especially Layer 1 options, experienced an upswing in interest, acting as natural liquidity partners for DeFi returns,”
Ethereum looks ready to surge further. Notably, its blockchain facilitates more transactions than Bitcoin, thus accelerating and streamlining payment processes.
Additionally, Ethereum enables various application development, recognized for its smart contracts, which form the backbone of decentralized applications, such as DeFi projects and NFTs.
Ethereum is experiencing an explosion of novel applications, which is likely to boost its prominence.
As the transition to Ethereum 2.0 nears, many stakeholders seem optimistic about the transformational impact it will bring. The upgrade promises to enhance the network’s speed, security, and transaction processing capacity on the blockchain.
Nonetheless, when considering Ethereum as an asset, its ongoing development presents challenges in forecasting future enhancements.
Ethereum has long trailed Bitcoin in terms of prominence; however, various factors warrant excitement for its future, especially as fintech experts project significant advancements. Could this be Ethereum's moment to outdo Bitcoin?
