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Ethereum, the world's second-largest cryptocurrency, has surpassed $4,000 for the first time.

LONDON — Ether soared past $4,000 on Monday, setting a new high and expanding the world's second-largest cryptocurrency's stunning rally.

According to Coin Metrics, Ether, the digital token of the Ethereum blockchain, had risen nearly 7% in the last 24 hours to $4,141.99 at 3:40 a.m. ET. It is now worth $476.3 billion, less than half of bitcoin's $1.1 trillion market cap.

As of 8:15 a.m. ET, ether was trading at $4,110.87, up 6%.

Ether, which was once in bitcoin's shadow, has recently seen parabolic gains as investors search for alternative cryptocurrencies to invest in. In April, bitcoin dropped by more than 2%, while ether increased by more than 40%. According to CoinMarketCap, the entire crypto market is now worth over $2.5 trillion, owing to increasing interest in the space.

Earlier this year, mainstream investors and some corporate buyers, such as Tesla, flocked to bitcoin, viewing the digital coin as a potential inflation hedge as central banks around the world printed money to relieve coronavirus-ravaged economies. Major Wall Street firms such as Goldman Sachs and Morgan Stanley have also attempted to provide bitcoin exposure to their wealthy clients.

However, some investors are still sceptical of the crypto craze. According to Michael Hartnett, chief investment strategist at Bank of America Securities, bitcoin's rally appears to be the "mother of all bubbles," while Alvine Capital's Stephen Isaacs claims there are "no fundamentals with this product, period."

Bitcoin vs. Ethereum

The Ethereum network, which was founded in 2013 by Vitalik Buterin and a group of other software developers, allows people to build applications on top of it. The network's native currency is ether.

Bitcoin and ether are both digital currencies, which makes them similar. They do, however, have their differences.

Whereas bitcoin is viewed as a store of value similar to gold by its supporters, Ethereum aims to create a type of decentralised internet that is not maintained by any central authorities.

It has served as the foundation for a growing trend in cryptocurrency known as “decentralised finance,” which aims to recreate traditional financial products using blockchain technology, the distributed computer system that underpins many cryptocurrencies.

Ethereum is also benefiting from the rise of non-fungible tokens (NFTs), which are digital assets designed to represent ownership of one-of-a-kind virtual items such as art and sports memorabilia. Ethereum powers many NFTs, including CryptoKitties and CryptoPunks.

However, the increased activity has caused congestion on the Ethereum network. Ethereum is currently undergoing a major upgrade that, in theory, will allow for faster transaction times and a reduction in the amount of power required to process transactions. Environmentalists have criticised both bitcoin and Ethereum for the impact of crypto mining on the climate.