(Bloomberg) — Ether has grabbed the limelight from Bitcoin as cryptocurrencies extend their rebound this year.
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The second-largest digital asset is up 14% this week, outstripping larger rival Bitcoin’s 9% gain over the period, courtesy of optimism engendered by the latest software upgrade of the token’s underlying Ethereum blockchain.
The revamp of crypto’s most important commercial highway enables investors to queue up to withdraw Ether coins they had pledged to help operate Ethereum in return for rewards — a process known as staking.
Those most enamored by digital assets argue this new flexibility to extract Ether burnishes the allure of staking and therefore the token itself longer term. Worries that the ability to withdraw would trigger a flood of Ether sales have also proved unfounded, at least so far.
“We’re already seeing more institutional demand when it comes to Ethereum now that they can stake, unstake, more instant liquidity,” Annabelle Huang, managing partner at crypto lender Amber Group, said on Bloomberg Television.
At the same time, crypto traders remain on alert given that the Ethereum Shanghai upgrade only took place on Wednesday.
The impact of allowing the withdrawal of staking rewards and initial capital “is yet to be seen,” crypto fund manager Digital Asset Capital Management wrote in a note, adding that it “will be watching both withdrawal and selling data closely on-chain to see if there is resulting sell-pressure.”
About a net 86,000 of Ether tokens, worth $182 million at current prices, have been withdrawn so far since the Shanghai upgrade — a sliver of the 17.4 million of Ether locked up for staking, data from Nansen shows.
Ether climbed as much as 6% on Friday and was trading at $2,113 as of 11:51 a.m. in Singapore. That took its year-to-date jump to 76%, narrowing the gap to Bitcoin’s 86% rally. The largest token edged up to $30,760.
Digital assets have partially recovered this year from a $1.5 trillion crash in 2022 that precipitated a string of blowups and scandals, most notably the bankruptcy of the FTX exchange.
Speculative investments such as crypto have also been enlivened by expectations of an eventual easing in Federal Reserve monetary policy. But uncertainty continues to shroud the market outlook.
“Personally, I don’t think we are out of the woods yet,” Amber’s Huang said.
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