Ether outperforms bitcoin with capital rotation and digital asset treasury boom: analysts

Ethereum outperformed bitcoin and other major altcoins on Wednesday, while the broader market saw a fair amount of recovery from an earlier dip.

According to The Block's crypto price page , bitcoin rose 0.56% in the past 24 hours to trade at $111,683 as of 10:35 p.m. on Wednesday. Since reaching its all-time high of $124,128 mid-August, the cryptocurrency had steadily declined to reach a low of around $107,500 earlier this week.

Ethereum rose 3.96% to $4,456, showing a notable price growth among altcoins. While ether often follows the price movements of bitcoin, the second-largest cryptocurrency has held its elevated price levels since August with less volatility than bitcoin.

"Ethereum's outperformance stems from stronger ETF inflows, supply tightening from increased staking, and growing demand from digital asset treasuries," said Nick Ruck, director at LVRG Research. 

Ethereum's price has benefited from strong capital inflows into spot exchange-traded funds in July and August, with these inflows outweighing bitcoin ETF inflows in recent weeks.

Presto Research Analyst Min Jung said that buying pressure in the market is maintained by continued accumulation from digital asset treasury companies (DAT), attributing Ethereum's notable gains on Wednesday to this trend.

"ETH is once again outperforming, likely benefiting from the same DAT-driven flows," Jung said. "However, we remain cautious on the sustainability of this theme and the continued capacity of DAT firms to support elevated purchase volumes."

Analysts have also previously pointed out that there is ongoing capital rotation from bitcoin to Ethereum, as traders see more opportunities to profit from the cryptocurrency after bitcoin's record-breaking run in July and August.

DATs

Corporate digital asset treasuries, boosted by a wider market rally earlier this year, have become one of the defining trends in crypto this year. Michael Saylor's Strategy, the largest corporate holder of bitcoin, recently added 4,048 BTC to its stash, bringing total holdings to 636,505 BTC.

Recently, more companies have started to pursue treasuries around ether and other cryptocurrencies. The four largest corporate holders of ether — Bitmine, SharpLink Gaming, Bit Digital and BTCS — collectively hold around 2.7 million ETH, worth over $12 billion.

Meanwhile, traders remain focused on the U.S. Federal Reserve's rate-cut trajectory, keeping an eye on the nonfarm payroll data this week, Jung said.

The nonfarm payroll (NFP) data measures employment growth in the U.S., offering insight into the overall health of the U.S. economy and the state of inflation. Higher-than-expected payroll growth may suggest an overheating economy and rising prices. Last month's NFP data is scheduled for release this Friday.

The next Federal Open Market Committee meeting is scheduled for Sept. 16 and 17. The CME Group's FedWatch Tool indicates a 97.6% chance of a 25 basis point rate cut in the upcoming meeting.