Ethereum Outperforms Bitcoin After Fed Rate Cut: Is Altseason Here?

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In the past week, the price of Ethereum (ETH) has surpassed that of Bitcoin (BTC), particularly after the US Federal Reserve (Fed) cut interest rates by 50 basis points (bps) on September 18, 2024.

Ethereum Surges Ahead of Bitcoin: Is Altseason Around the Corner?

Ethereum has shown remarkable performance in recent days, with ETH climbing by 16% to $2,666 following the Fed’s rate decrease, marking the first cut in four years. In contrast, BTC has experienced a 9% increase during the same period, currently trading at $63,643.

The ETH/BTC trading pair has risen from 0.0385 on September 18 to 0.0420 on September 23, reflecting an approximate 9% increase. This trading pair is notably significant for crypto analysts who monitor market sentiment towards altcoins in comparison to BTC.

When ETH and other altcoins appreciate in value relative to BTC, it often indicates a heightened investor interest in altcoins, potentially signaling the onset of an “altseason.” On the other hand, if BTC outperforms ETH, it might denote a return to Bitcoin’s dominance.

It is important to note that since the interest rate reduction, the funding rate for Ethereum futures has turned positive, currently at 0.0058% according to data sourced from cryptocurrency futures trading and information provider CoinGlass.

For those unfamiliar, a positive funding rate indicates that traders with long positions — in this case, long ETH — are compensating those with short positions, which showcases bullish market sentiment. The shift in funding rate suggests increased optimism about ETH’s future pricing, likely fueled by heightened demand and confidence following the rate cut.

However, investors should remain wary of rapid shifts in funding rates, as this may lead to market corrections amid over-optimism or due to changes in external conditions.

Ethereum Faces Strong Competition from Competing Blockchains

Over the course of 2024, Ethereum has faced scrutiny for its relatively underwhelming performance compared to its rivals. Even significant events, such as the US Securities and Exchange Commission’s (SEC) approval of ETH exchange-traded funds (ETFs), have not provided a substantial boost to the second-largest cryptocurrency by market cap.

In contrast, rival smart contract platforms like Solana (SOL), Binance Coin (BNB), and Tron (TRX) have made notable advancements, both in terms of price growth and ecosystem development.

For example, the Solana ecosystem experienced numerous developments at the recently concluded Solana Breakpoint 2024 event in Singapore. Among other announcements, Franklin Templeton disclosed plans to launch a mutual fund on Solana.

Additionally, all attention is on former Binance CEO Changpeng Zhao’s release from prison set for September 29, 2024. Crypto analysts anticipate that Zhao’s release could ignite bullish momentum for Binance’s native token, BNB, which has demonstrated remarkable resilience despite the legal troubles faced by the exchange’s former CEO.

With the growing adoption of Ethereum layer-2 solutions that offer high scalability and low transaction fees, the competitive landscape of the smart contract sector is expected to intensify. ETH is currently trading at $2,660, representing a 3.3% increase over the last 24 hours.