There are two very real reasons Ethereum is taking off

There are two very real reasons Ethereum is taking off

Ethereum is up more than 50% in the past week. In 2021, the world’s second largest cryptocurrency has risen more than 360%. And since the stock market bottomed late last March, Ethereum is up an astonishing 2,200%.

During the 2017 crypto boom, Ethereum shot up to more than $1,400. After falling more than 90% during the eventual bust, it just surpassed that level in January of this year. Now it’s worth more than $3,200 as of this writing.

Bitcoin is performing well this year but it’s up “only” 100%. So why is ETH up so much more than Satoshi’s invention of late?

You can never drill these types of price moves down to a singular reason, so let’s look at what Ethereum is and does to get a better sense of the euphoria in this digital asset.

Back in the 2017 crypto bubble there were no use cases beyond using it as a store of value on the security of the blockchain. Now, there’s nothing wrong with a store of value as the main selling point for something like Bitcoin. Bitcoin has the potential to become the digital version of gold, which has itself been a store of value for thousands of years. And gold has an estimated market value of around $10 trillion.

Ethereum is more than a store of value. The bull market in 2017 was all about the possibilities of this technology, but there were no applications or real world uses for cryptocurrencies.

The crypto run this time has two features the 2017 version didn’t—institutional adoption and actual applications. According to the Financial Times, [hotlink]Coinbase[/hotlink] now has more than $122 billion in institutional capital on its platform, up from just $45 billion at the end of 2020. For most of its existence, crypto has been driven by individual and retail adoption. That is changing.

But it’s the use cases that are likely driving Ethereum higher. Ethereum is a blockchain just like Bitcoin but it differs in that it is programmable. This means developers can write code, create rules, and make applications on the platform. These “smart contracts” can be used to validate agreements securely.

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You can think of the applications that can be built on Ethereum much like the apps that can be developed on Apple’s App Store or Google’s Android system. The biggest difference is there are no giant tech behemoths behind the scenes controlling Ethereum’s network. This is what attracted so many people to crypto in the first place: It’s decentralized in terms of who controls it. The general idea is you can create rules for proof of ownership and avoid scams or hacks because of the security of the blockchain.

And you need Ethereum to buy things on Ethereum’s network. According to the Wall Street Journal, more than 7 million new accounts that hold Ethereum balances were created in the first four months of 2021, bringing the total up to more than 55 million. And transactions totaled $1.5 trillion in the first quarter, more than the previous seven quarters combined.

There is a lot of stuff going on behind the scenes in decentralized finance (DeFi) that could prove to be transformational in the years ahead, but the use case most non-crypto people would be familiar with are non-fungible tokens (NFTs).

Smart contracts are simply code that is stored on the blockchain. Now blockchains themselves are essentially worthless, but NFTs provide a unique ID for a piece of digital art that can have its own rules for transferring ownership. So you could write into a smart contract for a digital piece of art being sold as an NFT that the original artist earns a certain percentage of any future sales of his or her creation. This is a huge leap forward for creators.

The most famous example of a digital artist taking advantage of this technology is Beeple, who sold an NFT of his work for $69 million. In concert with the National Basketball Association, Dapper Labs created NBA Top Shot, which essentially allows fans and collectors to buy and sell short highlights of NBA players that are stored on the blockchain. Some of the most sought-after moments have traded hands for six figures on the platform. The Kings of Leon even released their new album as an NFT, selling tokens that will give fans perks including specialty albums or front-row concert seats.

The hope is these smart contracts could displace or work alongside many of the tasks and services we use that are bogged down with paperwork and outdated practices. You could see a world where the sale of art, concert tickets, music rights, or title insurance, and money transfers or other financial transactions are performed using smart contracts.

The hope in the crypto community is Ethereum can become the platform that powers many of these future use cases now that there are real-world examples that actually work.

From a purely financial asset perspective, none of this helps us determine what the fair price is for Ethereum itself. The soaring price is likely taking into account the future potential of this technology. There is also an element of momentum, speculation, and the fear of missing out at play here.

It’s impossible to know what the “fair” value of Ethereum is or could be. Crypto is like a commodity in that there are no cash flows, profits, dividends, or income streams to use for valuation purposes. It’s all supply and demand.

Right now, the demand for Ethereum remains strong. Assuming the use cases continue to grow, that demand could remain for a while.

Ben Carlson is the director of institutional asset management at Ritholtz Wealth Management. He may own securities or assets discussed in this piece.

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Ethereum ‘yet to take off’ and is on track for $5,200 soon, say experts - CityAM

Ethereum’s startling run through $3,000 and above is far from over and could see Bitcoin’s main rival surpass $5,000 before long, according to expert analysts.

Ether, the native cryptocurrency for Ethereum and the second-largest digital asset by market cap, broke the $3,000 threshold earlier this week as it more than doubled its 2017 all-time high.

Yesterday, Vitalik Buterin’s brainchild reached up and planted a kiss on the cheek of $3,500 before gravity saw it slip down to $3,235. Today, it crawled back up to take a breather on a ledge of support around $3,360.

Many traders will no doubt be expecting ETH to hold track for a while and consolidate before making any determined effort to return to yesterday’s levels, and historical patterns would favour this notion.

However, experts at global exchange Kraken have a far more bullish narrative on the coin that could, one day, challenge Bitcoin’s 12-year dominance of cryptocurrency.

In its latest Market Recap Report, analysis by Kraken Intelligence suggests the ETH rally may still be in the early innings. They report that, even with the most-recent price appreciation, Ether dominance – its share of the total crypto market cap – is only coming close to the 18 per cent multi-year high achieved in mid-February, but remains far away from the +30 per cent achieved at the height of the 2017 rally.

Multi-billion dollar explosion

“The multi-billion dollar explosion in DeFi and this year’s NFT frenzy took place on applications built on Ethereum,” said Pete Humiston, Manager of Kraken Intelligence.

“Past performance does not indicate future prices, but the fact that Ethereum remains resolutely at the heart of bleeding-edge activity and innovation in the industry – just as it did in the previous bull market – suggests ETH has plenty of upside potential.

“With Ether held on exchanges at a 2.5-year low, and institutions warming up to the second largest crypto asset, as well as market participants having locked up more than four million ETH – 600k on Kraken’s secure on-chain staking service alone – ahead of the launch of Ethereum 2.0, the stars are aligning for another significant leg up for the ETH price.”

On page 17 of its 22-page dossier, the report charts “ETH: The Road to $5,200”, and uses a logarithmic regression graph to highlight potential future positions for Ethereum.

“As difficult as it will be for ETH to sustain double digit returns, the case could also be made that ETH still has plenty of upside,” the accompanying notes state.

“Since hitting a multi-year high of ~18 per cent around mid-February, ETH’s dominance has mean reverted down to 12 per cent and had largely trended sideways.

“The fact that ETH continues to climb higher while retaining the same market share suggests that ETH has yet to take off.”

Ethereum hits new record high above $3,400, extending its more than 300% rally this year

GUANGZHOU, China — Ether, the digital coin linked to the Ethereum blockchain, hit an all-time high of $3,456.57 as the cryptocurrency extends a rally that has seen its price gain over 350% this year.

The digital coin pared some of those gains in Tuesday morning trade in London and was trading at $3,369.74 at 11:20 a.m., according to CoinDesk data.

Interest in cryptocurrencies has surged over the past year with bitcoin continuously pushing new record highs. A number of factors including rising institutional interest and major companies such as Tesla buying the digital coin have been credited with its rise.

Bitcoin has been described as “digital gold” or a store of value in times of geopolitical tumult or financial market volatility as well as a hedge against inflation.

But Ethereum is different. It acts more as a platform that developers can build apps on. Ethereum is the name of the network or underlying blockchain technology, while ether is the digital currency used to power the platform.