by Joseph Young
Following the huge rise of trending cryptocurrencies such as Ethereum and Dash, the trading volumes of popular cryptocurrency exchange Shapeshift have surged substantially over the past two weeks.
“The surge in our volumes has been pretty constant all month, but the last two weeks especially has been nuts, which coincides with a huge rise in Ethereum, Dash, and Dogecoin. Interestingly, we seeing strong growth not just in top line transaction quantity, but in API orders, as ShapeShift’s API has been integrated into over 45+ industry sites at this point,” Shapeshift founder and CEO Erik Voorhees told BTCMANAGER.
The demand of alternative digital currencies like Ethereum began to increase at a rapid pace since the announcement of Microsoft Azure to integrate the Ethereum network into its cloud-based systems and products in November 2015.
“Microsoft and ConsenSys are partnering to offer Ethereum Blockchain as a Service (EBaaS) on Microsoft Azure so Enterprise clients and developers can have a single click cloud based blockchain developer environment,” Microsoft Azure Director Marley Gray announced on November 9, 2015.
The price of Ethereum spiked to its all time high on January 21, the day after the R3 Consortium announced its plans to integrate the Ethereum infrastructure into its distributed ledger-based financial system.
R3 Consortium is a collaborative project involving the world’s wealthiest and most powerful banks, including Barclays, UBS, and Wells Fargo. Earlier this month, the consortium developed and successfully launched a blockchain-based shared financial system which enables 11 banks on the platform to transact and transfer assets at lower costs.
“Ethereum is a well-known open source technology in this space and we also look forward to collaborative experiments using other technologies,” said Barclays chief technology officer Brad Novak.
According to the data provided by real-time digital currency data application Coincap.io, the market cap of Ethereum peaked at US$200 million on January 26, surpassing the value of non-bitcoin dominant cryptocurrencies such as Ripple XRP and Litecoin.
Created by Coinbase engineer Charlie Lee in October 2011, Litecoin maintained its reputation as the premium alternative currency to bitcoin over the past 5 years. However, the value of Litecoin began to decline following the emergence of unique cryptocurrencies such as Ethereum and Dash.
“Litecoin interestingly has been pretty flat, with only marginal gains during a rally in almost every other alt,” said Voorhees.
He further emphasized that the demand for Ethereum overtook Litecoin because of its unique technological characteristics. The Ethereum network as a decentralized software platform enables anyone on the network to run smart contract-based applications, without censorship, fraud or third-party interference. Ether, the network’s token-type store of value, allows users to settle contracts and transactions securely, with low processing fees.
“In my personal opinion, it makes much more sense for Ethereum to be the number 2 coin, instead of Litecoin. Litecoin has no significant difference to Bitcoin. It has some marginal changes, and has value as a “Plan B” type of thing, but Ethereum is truly different than Bitcoin. Bitcoin and Ethereum are complements, while I see Bitcoin and Litecoin more as competitors. It doesn’t surprise me at all that Ethereum has overtaken Litecoin,” Voorhees said.
The rise in the value of alternative cryptocurrencies is also attributable to the decline in the price of bitcoin. Due to the disputes between Mike Hearn, bitcoin developers and the community, combined with world market forces, the value of bitcoin has dropped to the $377 USD range.
Since the controversial resignation of the former Bitcoin Core developer, the dominance index ratio of bitcoin, a measure of the ratio of bitcoin to altcoin value by market cap, plummeted down to 88 percent.
“One thing we watch closely is the “Dominance Index” shown on CoinCap.io. This shows the relative value of Bitcoin’s market cap to the market cap of all altcoins combined. Around the end of December, it was about 91 or 92 percent. Over the past weeks as the rift between Bitcoin’s Core Dev team and much of the rest of the community has festered, Bitcoin has fallen proportionally to 88 percent today,” explained Voorhees.
Currently, bitcoin investors and the bitcoin community are holding onto the hope that the value of bitcoin will quickly recover in the short-term.