Could Ethereum surpass Bitcoin in market capitalization this year?

Even though Ethereum is the second largest crypto-currency in terms of market capitalization, ETH continues to outpace BTC in terms of price growth.

Bitcoin is struggling to hold support at $21k, while Ethereum has managed a rebound from the $1,300 level, currently trading at $1,484. While Bitcoin is up 2% over the past 24 hours, Ethereum’s price has seen a substantial 8% increase today, even with the uncertainty in the global and crypto markets.

Crypto-currency market update

After dipping below the $1 trillion market cap mark on Monday, the global crypto-currency market is trying to rebound and is currently at $990 billion. One of the major drivers today is Ethereum, which has seen an impressive rebound from the $1,300 level, which was unexpected by most traders.

While the 24-hour charts may look promising, the sharp drop in trading volume over the past 24 hours for Bitcoin and Ethereum suggests that the current market action – the bounce – is not confirmed.

The reason for the volatile market conditions is the upcoming 75 basis point interest rate hike by the Fed in its latest aggressive effort to curb inflation.

After CPI numbers released on July 13 signaled that inflation continues to rise, the Fed prepared to raise interest rates to help the economy. While the initial rumor was for a 100 basis point increase, the Fed will instead raise interest rates by 75 basis points today.

Opinions on whether or not the Fed’s interest rate hike will affect the crypto markets significantly vary, with some saying that the price of bitcoin shouldn’t be affected much by the interest rate hike. On the other hand, the stock market is likely to increase its volatility, which could spill over into the crypto-currency markets as bitcoin seems to follow the stock market’s price action.

However, since Ethereum has dominated the market in recent weeks, we may not see much movement from Bitcoin even after interest rates rise.

Bitcoin’s price may fall to the $20,000 level.

While bitcoin has managed to hold the current $21,000 support relatively well thanks to Ethereum’s bullish price action, the crypto asset is likely to test the waters of the $20,000 area later in the week, especially with the upcoming Fed action.

Additionally, news of an SEC investigation into crypto exchange Coinbase does not help crypto markets, as the latest action by the government agency highlights the wild and unregulated nature of crypto markets. Many malicious actors are attempting to scam investors and take advantage of insider knowledge due to the anonymous nature of crypto-currencies.

While regulation of crypto-currency markets may curb the unfair actions of reasonable white-collar individuals, there will always be plenty of outright malicious actors looking to get their piece of the pie. No amount of regulation or oversight will stop them from running scams, hacking wallets and obtaining crypto-currencies illegally.

Will Ethereum surpass Bitcoin in market capitalization in 2022?

The question on everyone’s mind is whether Ethereum could surpass Bitcoin in terms of market capitalization by the end of 2022. With the Ethereum network’s merger scheduled for September, the crypto-currency could show substantial price growth by the end of the third and fourth quarter of this year.

As Ethereum’s market capitalization approaches 50 percent of Bitcoin’s, Ethereum’s price still needs to more than double to overtake Bitcoin. The best chance for ETH to overtake BTC is for the crypto-currency to slowly outperform Bitcoin on a daily basis.

As the crypto-currency market recovers and Ethereum’s network moves from proof-of-work to proof-of-stake, we could see additional bullish momentum for ETH that could push it higher. The first step for ETH to overtake BTC in terms of market cap is to consistently trade at over 50% of Bitcoin’s market cap. Once this step is taken, bulls could enter the Ethereum arena and continue to push ETHUSD higher.

Ethereum is more likely to show substantial price growth after the successful network merger in September and a network upgrade that will allow ETH to process orders of magnitude more transactions per second than it currently can. Until Ethereum’s network proves itself in the broader crypto market, ETH is unlikely to overtake BTC.