On Tuesday, August 12, the price of Ether continued to rise, breaking through $4,500 for the first time in over three years.

According to TradingView's Coinbase data, the second-largest digital currency by market capitalization is valued at $463.8 billion.

Additional data from Coinbase provided by TradingView shows that the cryptocurrency has risen nearly 40% this month, having previously dropped to around $3,375 on August 2.

In explaining the latest price surge, several analysts providing insights for this article pointed to a range of factors, including significant capital inflows into exchange-traded funds (ETFs) that offer exposure to digital assets.

For example, Joe DiPasquale, CEO of cryptocurrency hedge fund BitBull Capital, commented on these developments via email, stating, "The breakout of ETH is driven by a new round of capital inflows, favorable macro conditions, and optimistic sentiment regarding potential spot ETF approvals."

Brian Huang, co-founder of fintech company Glider, also commented, emphasizing several variables that led to the recent rise of Ether.

He cited data from Blockworks in an email, saying: "Institutional buyers are stepping in: the amount of ETH held by corporate treasuries surged this summer, indicating long-term confidence from corporate treasuries. "

Huang added: "The inflow of funds into ETH ETFs has also reached an all-time high, indicating that traditional investors are preparing for further increases."

He pointed out: "In terms of application, both Stripe and Circle have announced EVM-compatible Layer 1 layers, which solidifies Ethereum's status as the universal settlement layer for Web3. These factors together make a strong case for institutional demand, mainstream adoption, and network dominance, contributing to ETH's recent breakthrough of $4,500."

Momentum trading

Analysts highlighted the impact of momentum trading, referring to investors buying cryptocurrencies with the expectation that the current upward trend will continue.

DiPasquale stated: "Once the main resistance level is broken, momentum traders will flock to the market, amplifying the rise. With improved liquidity and market sentiment turning bullish, buyers are preparing for further increases after a long period of consolidation."

Tim Enneking, managing partner at Psalion, also commented on this development.

He stated in an email: "Currently, ETH is in a momentum trading phase, trying to re-establish parity with BTC. There hasn't been any fundamental change this week to support a 50% increase—let alone more than doubling in the past six years!"

"But let’s look at this objectively: If ETH wants to regain strength relative to BTC, it still needs to rise by nearly $1,000 in the absence of BTC hitting a new high," Enneking added.

He pointed out: "Almost a year ago, the price of BTC was $49,000; on the same day, the price of ETH was $2,100." "BTC hit a new high and has risen 2.5 times in a month; even with the current significant rise, ETH has only increased by just over 2 times. To match BTC's performance, ETH must reach $5,300—while BTC's price cannot exceed $123,000."

Enneking summarized: "We can do the same analysis with dominance, and we see that ETH is recovering from recent lows once again."

Traders favor Ether over Bitcoin

More than one market observer has compared Ether to Bitcoin, claiming that at least for now, investors are flocking to altcoins instead of the world's most famous digital currency.

Bitcoin has repeatedly hit new highs during this bull market cycle, while Ether has failed to surpass the all-time high set at the end of 2021.

Julio Moreno, head of research at CryptoQuant, commented on the situation, stating via Telegram: "Relative to Bitcoin, ETH continues to be favored by investors and traders, which increases the demand for ETH relative to Bitcoin. This has led to the price of ETH rising and outperforming Bitcoin."

He said: "For example, the amount of ETH held by ETFs is growing at a faster rate than Bitcoin, and the ETH/BTC ETF holding ratio has risen from 0.05 in early May to 0.15."

The following chart illustrates these developments:

He emphasized: "In the last five weeks, the spot trading volume of ETH has exceeded that of Bitcoin, and a similar situation has occurred."

The chart below helps to visualize this situation:

High spirits

An analyst attributed the recent price increase of Ether to a shift in investor sentiment, stating that they were overly pessimistic about Ether at certain times.

Daniel Polotsky, founder and chairman of CoinFlip, stated via email: "I think this is largely just an overly pessimistic sentiment."

"In June of this year, I told (Forbes) that Ethereum was under pressure due to concerns about scalability and transaction fees, but these concerns are somewhat exaggerated," he elaborated.

Polotsky stated: "I had mentioned that Ethereum could be a strong buy at such price levels because it often tends to revert to the mean."

He continued: "In April, the price of ETH against Bitcoin fell to very low levels, when the trading price of ETH against BTC was 0.019. This ratio has not been seen since the end of 2019, indicating that market sentiment may be overly pessimistic and not reflecting reality."

Polotsky concluded: "As the price of Ethereum soars above $4,500, this reversion seems to be playing out."