Ethereum came into the crypto world in 2014, and ever since then, it has carefully secured its spot in the cryptocurrency hall of fame in terms of its impact and history.
With a current price of more than $606.53 and a market cap of about $68,967,139,005, it is the world’s largest cryptocurrency, second only to Bitcoin – and as it stands now, it has captured the fancy of tons of investors, courtesy to its market performance.
The current price and market capitalization of Ethereum (Source: Coinmarketcap)
Even though Ethereum is frequently used as an all-inclusive word, it is a designation for the Blockchain system, which is ETH (or Ether), the native currency which Ethereum runs on. This Blockchain system makes use of smart contracts to foster its so-many transactions around the globe, and you can be sure that they are entirely safe.
But, what really drives the Ethereum price?
There are three main factors that most affect the Ethereum price:
- Decentralized finance
- The Coronavirus pandemic
- The introduction of Ethereum 2.0
At Trading Education, we analyzed these three factors, and below we will elaborate on what we found out.
So, why should investors consider investing in Ethereum? Ethereum is an open-source Blockchain-powered cryptocurrency platform that executes safe crypto-based transactions. The open-source Blockchain system is referred to as dApp (decentralization application).
Aside from the native Ether of Ethereum, it is also supportive of a host of other cryptos. Many of these cryptocurrencies are active Defi market (decentralized finance market) – a quick-growing market that offers services like savings programs, insurance, and loans that are free from the troubles of the big banks and some other large institutions.
All through 2020, Ethereum alone has executed more than $13 billion worth of decentralized transactions, witnessing a $10 billion addition from the previous year. As the market continues to demand more decentralized transactions, Ethereum will massively increase in value as the other cryptocurrencies that run on it will keep growing.
In addition to being the second-biggest cryptocurrency on the planet, the FCA (Financial Conduct Authority) has revealed that Ethereum is the fourth most popular cryptocurrency in the UK. A whopping seventeen percent of Ethereum’s respondents disclose that they’ve heard of it prior, rating it behind Bitcoin, Bitcoin Cash, and Facebook’s Libra.
What drives Ethereum’s price?
Ethereum’s price dropped from $200.70 to about $89.73 between 11th March 2020 to 13th March 2020. But notwithstanding, its price surged again at the end of April 2021, meaning that it recovered the price that it had before the COVID-19 pandemic and surged again to $200.
There has been a continuance of this bullish price movement all through 2020. In fact, for the first time, and lately, Ethereum surged beyond $400. It stayed at this value between 22nd October 2020 and 27th October 2020.
But, let’s see what really affects the price of Ethereum?
Factor 1: Decentralized finance
We explained previously in this article that the Ethereum network operates several of the cryptos in the Defi field. It supports more than 280,000 so-named ERC tokens, greater than forty of which by market cap are among the best performing one hundred cryptos. A lot is involved in the Defi zone, and the market for Ethereum will rise as the market continuously requires more of these services, assisting in increasing the price of Ethereum.
Factor 2: Coronavirus pandemic
Due to the seriousness of the coronavirus outbreak, it may seem surprising. Still, several crypto analysts agree that coronavirus (COVID-19) may have a significant long-term influence on the value of cryptocurrencies like Ethereum.
That’s because, as the whole world continues to fight the outbreak, the demand for wireless card transactions is expected to expand. Services like the Ethereum Blockchain could appear useful in enabling cashless transactions as corporations search for alternative payment methods.
Factor 3: The introduction of Ethereum 2.0
The long-expected update to the initial Ethereum Blockchain platform is Ethereum 2.0, better recognized as Eth2. The complete project is expected to be finished by 2021, with the project’s phase zero, scheduled to occur during November 2020 at some point.
The updated Eth2 project is built to handle more payments than its precursor while enhancing the efficiency of its energy significantly. A sole Ethereum transaction involves a whopping 22.65 kilowatt-hours at present. This implies that the energy usage of Ethereum is equal to that of all of Costa Rica over the span annually!
Ethereum is transitioning from a PoW algorithm (proof-of-work algorithm) to a PoS algorithm (proof-of-stake algorithm) as a component of the Eth2 update. In such a PoW method, to validate payments and link them to the Blockchain, cryptocurrency miners have to address complex calculations utilizing their device.
This method involves immense quantities of electricity, leading to the gigantic resource usage of Ethereum. In a PoS scheme, to validate their transfers, clients can actually ‘stake’ their cryptocurrencies as collateral.
As shareholders await Eth2’s gradual arrival, many analysts predict ETH’s value to spike throughout the following months since improved productivity would boost the market for ERC tokens.
How to invest in Ethereum for 2021?
What are the opinions of crypto experts about the price of Ethereum in 2021? Unlike the design of Bitcoin, Ethereum was designed not to have a fixed Ether supply, meaning that it is a highly scalable alternative when compared to other cryptocurrencies. It is for such reasons that lots of investors think that Ethereum is going to outperform Bitcoin in the long run. But, how much can the price of Ethereum go in 2021?
According to Trading Beasts, Ethereum will appreciably increase in value, with an all-time high value of $621.667 by December 2021. But it generally predicts that Ethereum’s growth will be slow and steady.
Trading Beasts’ most conservative forecast of ETH’s value places it at $497.334 at the end of the year, a price that is significantly lower than its present worth. And about a drop in 2% of the all-high time price of Ethereum.
A price prediction chart for Ethereum in 2021 (Source: Trading Beasts)
Although many people think that these predictions are unjustly bearish, LongForecast, also known as a predictor for the price of cryptocurrencies, the path of Ethereum will shine brighter. Even though it forecasts that the price of Ethereum will rather close at a disappointing rate of $ 578 at the end of 2020, it predicts a hopeful increase in value all through 2021, even hitting a new high of $1009 by August and ultimately closing at $816 at the end of the year.
The 2021 Ethereum to dollar forecast (Source: Long Forecast)
Best Bitcoin Exchange, another cryptocurrency exchange platform, has even a more optimistic prediction for the price of Ethereum. It forecasts that Ethereum will have a starting price of $1086 in February 2021, reach a price of $1593 in August, and close at $1660 by December of the same year. The chart below is a depiction of their prediction:
Ethereum price prediction for 2021 (Source: Best Bitcoin Exchange)
EThereum price beyond 2021
How far will the Ethereum price go in the long run? The figures below depict some of the prospective prices of Ethereum in the year 2020, 2021, 2022, 2023, and 2025+ provided by industry experts and technical analysts.
- Ethereum is the world’s second-biggest crypto, with a market capitalization of $68,967,139,005 and a current price of $606.53.
- In the crash triggered by the coronavirus pandemic, Ethereum’s price dropped from $200.70 to a low of $89.73.
- According to Best Bitcoin Exchange, Ethereum will attain a price of $1086 price in February 2021 and $1660 by December 2021.
- Trading Beasts has forecasted that Ethereum will not be a great investment in 2021 but will rather be a more advantageous investment from 2022 and beyond.
- The effect of the coronavirus pandemic increased the demand for Ethereum, as many people seek more secure methods of executing contactless transactions.
- The surge of Defi could mean a corresponding surge in Ethereum’s price.
- All through 2020, the Ethereum platform has carried out up to $13.5 billion decentralized transactions.
- The introduction of Ethereum 2.0 (Eth2) will boost the capacity of the platform and also rendering it a lot more efficient in terms of its energy consumption.
With the details provided in this article about the factors that drive the Ethereum price, we hope that this post has been informative enough to satisfy your curiosity. If you are looking at including Ethereum in your investments and want to learn the explanation to the question ‘Ethereum is a secure choice,’ there is no easier way to proceed than following through with the trends and forecasts in cryptocurrencies.
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