With old all time highs broken, eyes are now on $1,600 as the next target.

Ethereum has broken its three year old all time highs.

Many analysts think Ethereum still has more fuel in the tank.

Ethereum network metrics are eclipsing Bitcoin’s.

After a three year wait, Ether holders all over the world were given a reason to rejoice as the prominent cryptocurrency crossed its previous all-time high value of $1,448. The move comes amid a substantial DeFi bullrun and may be in part an effect of profits rotating back from DeFi tokens to ETH.

This upward ongoing momentum also could suggest an increasing amount of decoupling between the price action of BTC and ETH, something that has become increasingly more visible over the course of this ongoing bull season.

Lastly, another indicator of Ethereum’s growing crypto clout is that the network now typically settles more than 25% more transactions daily than Bitcoin (BTC). And while this increased usage has once again brought Ether’s high transaction fee problem to the forefront, it doesn’t seem to have deterred speculators or power users.

The experts air their views on what’s causing this surge

Even though BTC as well as a number of other decently sized altcoins (such as DOT, LINK) were able to scale up to their ATH values over the last couple of months, ETH had not been able to do so despite showcasing strong technicals.

To gain a better understanding of what’s causing the second-largest cryptocurrency to break out now, Finder reached out to Johnny Lyu, CEO of cryptocurrency exchange KuCoin. He pointed out that as the TVL (total value locked) on DeFi and staked ETH on-chain has continued to grow, the circulating supply of ETH seems to be in a downward trend, something that is sure to impact the short-term price of the currency in a positive way. He further added::

“Personally, I believe that ETH will outperform BTC in 2021. Without a doubt, Ethereum has already been the biggest network in crypto and the most promising dApps are running on it. For blockchain networks like Ethereum, the network effect will be enormous, which means this is a “winner takes it all” market. I would say if there will eventually be only one blockchain in 5 years, Ethereum has a big chance to be it.”

Similarly, Omri Ross, chief blockchain scientist for social trading and multi-asset brokerage company eToro, told Finder that the fact investors can now receive decent returns on their holdings via staking on ETH 2.0 may be playing a large role in making the asset more attractive to the masses.

For those unaware, with the recent initiation of Ethereum’s ‘phase 0’, it is now possible for anyone to stake ETH by committing batches of 32 ETH and maintaining an active validator client on the network. While this requires locking up one’s ETH for a period of 12-18 months, until the Ethereum 2.0 main net launches, the number of people willing to commit funds to secure the ecosystem has been steadily increasing over the last 30+ days, so much so, that there are now close to 80,000 active validators participating in Phase 0.

As one would expect, one of the core benefits of independent backers validating transactions is that it helps them yield steady monetary returns — currently around 10% annualised. Not only that, in the long term, ETH 2.0 seeks to greatly enhance transaction speeds while lowering processing charges, two factors that will undoubtedly be crucial as far as the growth of DeFi and other decentralized applications on the Ethereum network goes.

Ether to the moon? Maybe… but caution is still a must

Many experts believe that the unprecedented success of DeFi has resulted in ETH taking off in unimaginable ways, as a result of which there is no clear gauge as to where the currency might be heading in the next 5-10 years.

Nischal Shetty, CEO of cryptocurrency exchange WazirX, believes that an ETH boom may be in full swing and that there have been many factors that have led the currency’s recent rise, adding:

“The demand is coming from the fact that people have seen the power of DeFi, and they know that DeFi is going to be huge. It’s an enormous technological innovation and Ethereum is leading in this ecosystem. So as DeFi grows, the need for Ether as a currency in the Ethereum blockchain will increase. Secondly, with PoS coming up, a lot of Ether will be put into staking. This will reduce the available supply in the market, and will have an upward effect on its prices.”

That being said, Ross warns investors that even though Ether may possess sound technicals, it is essential that everyone does their own research and gathers accurate information from credible sources in order to ascertain the future implications of the technology they may be investing in. In his view, there are currently no sound methodological frameworks for the fundamental valuation of crypto assets - a task that is particularly difficult in a proof-of-stake paradigm. In this regard, he highlighted: “To produce a reasonable assumption, a valuation model would have to include multiple implications for the value of ETH as a base asset, including proposed changes to inflation schedules, projected gas fees, and more.”

Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

Disclosure: The author owns a range of cryptocurrencies at the time of writing

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.