Ether rises to a record high as use of Ethereum blockchain surges

ETHER, the second-largest cryptocurrency, soared to a record above US$4,400 on Friday, on bullish sentiment surrounding an upgrade to the Ethereum network and rival Bitcoin's recent rally to a high of its own.

The digital asset gained as much as 3.5 per cent to US$4,403.93, topping the previous record of US$4,379.62 reached in May. Other smaller tokens including Binance Coin and Solana rallied. Ether is now worth about US$520 billion, according to data from CoinGecko.com.

Ether's latest milestone comes as the digital token has far outperformed Bitcoin throughout this year with a sixfold increase amid surging retail and institutional investor interest in the space. Bitcoin has risen some 40 per cent this month to reach a record of almost US$67,000 following the debut of the first Bitcoin-linked exchange-traded fund in the United States.

Ether underpins the affiliated Ethereum Network, the dominant blockchain used for thousands of decentralised applications. The system got a further boost this week after a successful upgrade designed to make it faster and more energy-efficient.

"On-chain activity metrics for Ethereum appear to have found support and are reaching multi-month highs," said Sean Farrell and Will McEvoy, digital asset strategists with Fundstrat in a report on Thursday. Measures including transaction rate, new addresses and active addresses have shown strong growth this month after suffering declines in May, the strategists said.

Meanwhile, the biggest Bitcoin holders are accumulating more of the token and powering its rally, according to a report by the research arm of a crypto exchange.

Holders of 100 Bitcoin or more, so-called whales, and a supply shock drove the increased network activity, Pete Humiston, manager at Kraken Intelligence, wrote in a report. The weekly average holdings of whales rose 0.25 per cent since early October to reach a record US$724.4 billion, according to the report. The number of such holders increased 1.6 per cent to 16,156, the highest level since May.

"Larger market participants have grown increasingly more confident, preferring to accumulate further than to take profit," the report said. "With the number of whales and whale holdings rising, it is clear that whales are a driving force in this latest run-up and remain optimistic."

Bitcoin has more than quadrupled in the past year and reached a record near US$67,000 on Oct 20 amid optimism around the debut of Bitcoin futures-backed exchange traded funds in the US, and waning concerns about issues like China's crackdown on the digital asset space. However, crypto remains extremely volatile, and many experienced market players still regard it with a strong degree of caution.

In addition, market concentration is a concern to some. A recent report from the National Bureau of Economic Research said that the top 10,000 investors in Bitcoin hold more than one-third of the cryptocurrency in circulation. BLOOMBERG