Ether: Why the second largest cryptocurrency can't keep up with bitcoin

By the numbers: In 2017, bitcoin peaked in December at around $20,000. Then in January, ether peaked at about $1,400.

• In November 2021, bitcoin peaked around $70,000. Ether peaked around $4,500 just three days later.

Yes, but: Bitcoin has broken its all-time high twice this year, while ether has bobbed around $3,000 all year, nearly 30% off its high-water mark in 2021.

• And that's while other top-10 cryptocurrencies have jumped on bitcoin for the ride.

Between the lines: The reality of this must be doubly discouraging for Ethereans — the community behind the Ethereum blockchain network — because it had been working so hard to improve itself over Crypto Winter.

• For example, it launched a new way of securing the network that used less energy (a validation system called proof-of-stake).
• It spun up a ton of new connected blockchains to lower costs and moved software updates to improve the user experience.

The intrigue: On top of that, ether got a stamp of legitimacy in July when ether ETFs got approved, giving investors that prefer regulated products a way to access the ecosystem.

• But while bitcoin ETFs have now passed $100 billion in total assets, ether ETFs sit at under $10 billion.

The intrigue: Those exchange-traded products don't give investors access to everyone's favorite thing about ether these days: earning yield through so-called "staking" revenue.

What they're saying: "The fact that there is staking rewards to be held for those who hold Ethereum directly, it makes those ETFs a little less of a silver bullet," BlackRock's head of digital assets products, Robbie Mitchnick, said on the Unchained Podcast.

• Ether is also "a little bit more of a nuanced argument" around technology and innovation, he noted, versus bitcoin's simpler digital gold thesis.
• Still, Mitchnick noted that, for some investors, ether's historical returns more than make up for any of that.

The problem is, ether hasn't been delivering this time.

Zoom out: One issue is that those new connected blockchains mentioned above — chains secured by Ethereum proper — have diluted attention to the parent chain.

• Ethereum is a giant computer that no one controls, and users pay the Ethereum blockchain, in ETH, for it to do computational work.
• Want to send a token to someone else? That costs a little bit of compute, so Ethereum needs to get paid a little ETH to do it.
• If more people want to do things on Ethereum, ETH is worth more.

But now, much of the activity in what's known as the "Ethereum ecosystem" has moved to other chains, where it's been growing.

• That's good for crypto users, but not so good for ether holders. It means users are paying its little brother and little sister chains for all activity in 2024, so ether is less dear.

The latest: All that said, as of Monday ether's been on a bit of a run. Over the past seven days, it's up 8.1%. Over the past 30 days, it's gained 37%.

• In fact, in its weekly report, market-making firm Wintermute's over-the-counter desk reports that bets on stronger ETH price toward year's end are starting to come in.

What we're watching: A new SEC administration might even be open to ETFs with staking built in.