Ether (CRYPTO:ETH) got off to a rough start in 2022. At the start of the year, it sold off much harder than Bitcoin (CRYPTO:BTC) in the same period. At one point, ETH was down 24% for the year while BTC was only down 13.5% over the same time. Since then, the gap has narrowed considerably.
Why is that?
Because ETH has had a surprisingly decent couple of weeks. Since March 11, ETH has risen 24% while BTC has only risen 16%. BTC is still doing better for the full year, but ETH’s underperformance has been reduced.
In a recent article, BNN Bloomberg attributed ETH’s outperformance to an upcoming set of blockchain upgrades. Starting this month, the Ethereum Foundation will be working on improving the Ethereum blockchain, with the end goal of more transactions, better security, and a more environmentally friendly package. It could be promising if it all works. In this article I will explore the upcoming Ethereum upgrades and one other factor that could be pushing ETH’s price higher in March.
The biggest factor driving increased enthusiasm for Ether this year is the Ethereum Blockchain upgrades. Previously referred to as “Eth2,” these upgrades will deliver a number of improvements, including:
- 100,000 transactions per second (TPS)
- A merger between the Beacon Chain and Main-net Ethereum
- Shard chains
These upgrades purport to make ETH faster, more environmentally friendly, and more secure than it was before. Time will tell whether they deliver. But they certainly sound promising. The 100,000 TPS thing in particular looks like it could make ETH a lot faster. Currently Ether only supports 15 TPS, so we’re talking about 6,666 times faster. It remains to be seen whether the higher TPS translates to improvements in real world use, but there’s much to be excited about here.
NFT shakeout possibly complete
A second factor that could be driving ETH’s price higher this year is the bottoming of the NFT crash. For much of this year, NFTs were declining in popularity. Search interest in the term ‘NFT’ peaked in January, and declined by about 75% between then and March. Since then, the trend seems to have hit a bottom. If you look up ‘NFT’ in Google Trends today, you will see that interest has flatlined over the past week. Perhaps, the NFT buyers have been shaken out of the crypto market already.
If that’s the case then ETH should be free to behave more like a normal cryptocurrency this year. Last year, ETH massively outperformed Bitcoin because NFTs led to more demand for the token. This year, the decline in popularity of NFTs led to the very opposite occurring. Today, NFTs don’t seem to be a big part of the picture one way or the other. So, perhaps ETH will correlate more closely with Bitcoin for the remainder of the year. We can never be 100% sure what will happen. But with the Ethereum upgrades just around the corner and the NFT crash already done, Ether has more room to run than it had at the start of the year.