LONODON – Cryptocurrency Ethereum broke $4,000 for the first time on Monday, climbing to a new peak for a third day in a row on bets it may find new uses, although some analysts said it was overvalued at current levels.
Ethereum, the second-largest coin by market capitalisation, jumped more than six per cent to just below $4,175, and was last up around 2pc.
It has soared this year, fuelled by expectations of wider use, based in part on its role in decentralised finance – “DeFi” — platforms that facilitate crypto-denominated lending outside traditional banking.
An upcoming technical change to its software seen as reducing its supply has also provided a boost, while new institutional investors in the crypto sector have warmed to it amid a tepid quarter so far for bitcoin.
“(Crypto has) got a lot more institutional involvement than people who haven’t followed the market believe,” said Chris Weston, head of research at brokerage Pepperstone.
“And everyone’s been in Ethereum. It’s not a meme joke coin, it actually has some application use,” he added, referring to its role in DeFi.
But some analysts said Ethereum’s increasing valuation was not underpinned by data of how widely it is used.
“The continued divergence of its price relative to network activity raise questions about its valuation,” JP Morgan analysts wrote in a report to clients dated May 7.
Factors such as the number of active digital addresses in its network would be more consistent with a price of around $1,000, the US bank said.