Ethereum hit a new record high on Thursday, while Bitcoin, the world's biggest cryptocurrency, was holding steady and struggled to move higher.
The move is viewed as a broadening out of investor interest in cryptos.
According to prices tracked by Coindesk, Ethereum has jumped in the last 24 hours to a new high above $2,700. Bitcoin remains off its all-time high, hovering near $54,000.
Coindesk data also shows that other alternative coins, including XRP, Stellar and Bitcoin Cash, are among the digital currencies piggybacking off of Ethereum's gains.
The second largest cryptocurrency's rise comes after the European Investment Bank issued its first digital bond of €100m on the Ethereum blockchain, in collaboration with Goldman Sachs, Santander and Societe Generale, triggering speculation that the digital currency may be gaining traction among financial institutions.
Ethereum has already gained popularity in the mainstream through the form of non-fungible tokens, or NFTs, which are supported primarily on its blockchain. An NFT is a unique digital token that can turn any item in the digital world, from tweets to Gifs to videos, into a collectible asset. Like Bitcoin and other cryptocurrencies, NFTs are sold and bought via the blockchain. Non-fungible tokens verify authenticity and ownership by encrypting the creator's signature on the blockchain.
NFTs have caught the attention of big-name executives like Tesla's Elon Musk and Twitter's Jack Dorsey, NFL icons Eli and Peyton Manning, filmmaker Kevin Smith, singer Boy George, and brands like Funko, Pringles, Charmin, Pizza Hut and Taco Bell.
In a note to investors on Tuesday, analysts from JPMorgan explained why Ethereum has recently been outperforming.
The bank said that both the Bitcoin and Ethereum markets experienced a "comparable liquidity shock" earlier this month which triggered a "comparable de-levering of their respective derivatives markets in subsequent days." However, the analysts point out that Ethereum’s spot market depth has been able to recover quicker than Bitcoin's has.
Analysts also said that high-frequency cash and futures basis pricing revealed a much smaller impact in Ethereum markets despite "optically comparable net liquidations," while open interest data suggests better liquidity conditions in ETH futures compared to BTC futures.
In addition, JPMorgan cited high turnover on the public Ethereum blockchain, meaning a "noticeably higher fraction of those tokens can be considered highly liquid, further blunting the impact of futures liquidations."
"This suggests that ETH valuations may be less dependent on levered demand than BTC, a technical but occasionally important tailwind going forward," analysts added.
Ultimately, JPMorgan said Bitcoin is "more of a crypto commodity than currency and competes with gold as a store of value" whereas Ethereum is "the backbone of the crypto-native economy and therefore functions more as a medium of exchange."
"To the extent owning a share of this potential activity is more valuable, the theory goes, ETH should outperform BTC over the long run," analysts said. "Nevertheless, Bitcoin has remained dominant well into the DeFi boom that started late last year."
Bitcoin Foundation chairman Brock Pierce told FOX Business that the increased engagement and interest in Ethereum and other blockchain applications is directly tied to the "incredible movement" of Bitcoin.
"There is a question of competitiveness between Ethereum and Bitcoin, which of course, is true," Pierce said. "But I don't think a rise in Ethereum is at the expense of Bitcoin. Growth between the two can be interchangeable."
According to Coindesk, returns on Ethereum are up 274% year to date, while Bitcoin returns are up about 84% year to date.