LIVE MARKETS-Lagging ether soars ahead of bitcoin in May

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LAGGING ETHER SOARS AHEAD OF BITCOIN IN MAY

The world's no. 2 cryptocurrency ether is staging a strong comeback this month, narrowing the gap with its larger counterpart, bitcoin. The rebound comes as global risk appetite improved following a significant easing of U.S.-China trade tensions.

Ether ETH= has soared 45% in the two weeks of May to $2,596, while bitcoin BTC= has leapt nearly 10% to $103,709. Ether still lags bitcoin year-to-date, losing 22% versus bitcoin's near 11% climb.

So what's driving ether, the token liked to ethereum blockchain?

According to Bernstein analyst Gautam Chhugani, ether's rally signifies the crypto cycle broadening to use-cases beyond simply store of value, primarily in bitcoin.

"Stablecoin payments and securities tokenization are gaining mainstream adoption."

Use of stablecoins, U.S. dollar-pegged cryptocurrency tokens, has grown rapidly in recent years, and proponents say that they could be used to send payments instantly.

A bill that would create a regulatory framework for stablecoins, however, failed to clear a key hurdle in the U.S. Senate last week.

Chhugani also pointed to zero-commission Robinhood's HOOD.O deal on Tuesday to buy Canadian crypto firm WonderFi WNDR.TO to expand its international footprint.

"Brokers such as Robinhood could potentially offer tokenized equities on their own blockchain, built on layer 2 Ethereum. Layer 2 chains use ETH for gas fees as underlying currency, thus helping drive distribution and demand for ETH."

Additionally, for the last 12-18 months, ETH was the perfect delta-neutral hedge, Chhugani added.

"Crypto hedge funds were long BTC, (solana) and short ETH. As the narrative moves in favor of institutional adoption of blockchain and stablecoin payments, beyond simply store of value, it may be hard to justify ETH as a relative underperformer," he said.

To put it in context bitcoin, which has been touted as a "digital gold" makes up for 61.4% of the $3.36 trillion crypto market value, while ether accounts for 9.4%, according to data provider CoinMarketCap.

(Medha Singh)

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($1 = 0.7501 pounds)