Ether classic has outshined many altcoins lately. (Photo Illustration by Chukrut Budrul/SOPA … [+]
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Ether classic has had a great week, quadrupling in value in a matter of days as investors flock to altcoins, or digital currencies other than bitcoin.
The price of ether classic, a digital sibling of the more prominent cryptocurrency ether, reached an all-time high of $177.26 yesterday, according to CoinDesk data.
At this point, it had rallied more than 350% from its opening price of $38.67 on Saturday, May 1, additional CoinDesk figures show.
Since then, it has pulled back somewhat, but was still up more than 200% from the start of Saturday at the time of this writing.
[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]
Network Challenges
Traders have apparently taken an interest in ether classic, pushing it sharply higher, even though the digital asset’s network, Ethereum Classic, has encountered some challenges over the last few years.
“The ETC ecosystem is not very active, as demonstrated by on-chain data,” said Martin Gaspar, research analyst at CrossTower.
“The number of daily unique addresses on ETC steadily declined between 2018 and 2020, and has just recently picked up in 2021 amid the broader crypto market rally, according to data from BitInfoCharts,” he clarified.
“For comparison, daily active users on ETC stands in the tens of thousands in recent weeks, while ETH daily active users have been above 900,000 for the same period.”
“ETC has also endured several 51% attacks in 2020, which suggest the network is not very secure, as attackers were able to double spend significant amounts of ETC,” the analyst added.
Bullish Factors
On the other hand, ether classic’s price is being driven higher by a handful of bullish factors, according to Joe DiPasquale, CEO of cryptocurrency hedge fund manager BitBull Capital.
The altcoin has been climbing as it rides on the coattails of its digital sibling ether, he stated.
“The price has risen partly due to speculation following the massive ETH rally and partly because market participants are speculating on ETC having more relevance post the ETH 2.0 upgrade,” said DiPasquale.
“Since ETH will move to proof of stake, leaving ETC with proof of work, traders are speculating on whether that shift will give ETC a chance to operate independently and offer an alternative to the proof of stake chain,” he clarified.
Alt Season
Several analysts cited the so-called “alt season,” which Gaspar defined as a period when traders look to altcoins amid lagging growth in bitcoin prices, as potentially contributing to ether classic’s recent strength.
“We are seeing this now as Bitcoin has largely remained in the $50,000 to $60,000 range for a couple months,” he noted.
“Recent price appreciation in ‘old’ and less fundamentally sound cryptocurrencies may have led investors to pile on to ETC.”
“Essentially, investors are starting to look beyond the crypto giants to see what else is out there – what else can they buy low and HODL until they become millionaires,” said Collin Plume, president & CEO of Noble Gold Investments.
Sentimental Value
In addition to noting the aforementioned factors, some market observers claimed that ether classic benefits from having a sentimental value of sorts.
John Iadeluca, founder & CEO of multi-strategy fund Banz Capital, helped shed some light on this situation.
“While Ethereum Classic lacks the technological caliber of most modern cryptocurrencies, there is a sentimental value feeding the speculation creating the current price increase,” he stated.
“Ethereum Classic maintains the original, unchanged Ethereum blockchain. While obsolete relative to Ethereum as far as utility, Ethereum Classic stands as a piece of history that’s shaped the current cryptocurrency markets and has served as a milestone within the community.”
As a result, it holds appeal for some of the more tenured participants in the crypto space, he stated.
Plume offered a similar perspective, describing it as a “sentimental buy” “to a certain extent,” seeing as how “Ethereum is what’s being used by companies including JP Morgan and Fortune 500 companies.”
However, he offered a bullish outlook for the altcoin.
“Ethereum Classic did cap its supply of coins to 210 million, following the footsteps of its big brother, Bitcoin,” said Plume.
“Ethereum is also going to move to PoS from PoW. That will further push ETC to an ‘elite’ club,” he added.
“ETC will continue to rise and I think $1,000 is viable but its value will come from its exclusivity, not necessarily utility. Whether that’s good or bad depends on the perspective of the investor,” concluded Plume.
Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether and EOS.
