The Bitcoin (CRYPTO: BTC) price is trading right about where it was this time last week.
Meanwhile, Ethereum (CRYPTO: ETH), the world's number two crypto, remains up 5% over the week.
We say 'remains' up because both tokens have lost ground over the past 24 hours.
The Bitcoin price is down 4% while Ethereum is down 6%.
Still, Ethereum has gained an impressive 36% over the last month compared to a price gain of 11% for BTC.
So why has Ethereum been outperforming?
Ethereum outpaces Bitcoin price gains as Merge approaches
The answer to Ethereum's outperformance looks to be the upcoming Merge.
This will see the Ethereum blockchain transition from proof of work (POW) to proof of stake (POS). Once complete, the POW protocol will require a lot less computing power, cutting costs, increasing efficiency, and producing far less carbon emissions.
While the Merge has been underway for well over a year now, it may finally go from the final testing stages to live use by the middle of next month.
Commenting on how this transition has helped Ethereum rally faster than the Bitcoin price, eToro's market analyst and crypto expert Simon Peters said:
In terms of how the market is reacting there is now obvious evidence that it is becoming more actively sensitive to developments on The Merge. The [Ethereum]price has been on an upward trajectory and has reacted positively to developments as investors buy into the token ahead of the change.
But there is a more fundamental long-term potential here. The POS change will alter the economics of the token. While other blockchains already use POS, none have the sheer scale and variety of uses compared to Ethereum.
Will it last?
The Ethereum and Bitcoin price have both fallen over the past day. Is the Merge party over?
Addressing the retrace, Matt Maley, chief market strategist at Miller Tabak & Co, said there may be some profit taking going on. He noted investors may be cautious with some worrying economic data coming out of China.
Maley said (quoted by Bloomberg), "We have to realise that the crypto market is still speculative. I think it's normal and healthy, digesting the recent gains, especially in Ethereum."
Looking ahead, Alkesh Shah, global crypto strategist at Bank of America, cautioned of potential further corrections ahead for risk assets, which would likely see the Ethereum and Bitcoin prices fall.
"Our view is that risks related to rising rates, inflation and a mild recession are likely discounted," he said. "But the potential for a hard recession … may result in growth underperformance and another risk asset correction, including crypto/digital assets."
