Ethereum – No Signs of Slowing Down

Once again, Ethereum sets new all-time highs of $5344 AU gaining over 20% in the last week. Bitcoin remains range-bound but the alts market has contributed to an increase of 5% in the crypto market cap over the last 7 days – the market cap currently sits at $2.9T AU.

So, what’s driving Ethereum’s price rise?

Something to keep in mind is that Ethereum is not a traditional altcoin. It is ‘the Ethereum network,’ the pioneer of programmable blockchains and the enabler of all popular projects including DeFi and NFTs – “network” being the most crucial reason as to why its adoption and price gains have been so breathtaking.

If we see the price appreciation of Bitcoin as the signal of cryptocurrency being favoured as an investable asset, Ethereum’s price spike should be the signal of blockchain-based applications being acknowledged and adopted. 

As the cryptocurrency market grows as a whole, it is not easy to predict ETH price as itself, However, experts believe that ETH has the potential to occupy over 25-30% of the total crypto market capitalization as the market matures (it is 19.5% at the moment).

Ethereum’s price surge comes amid increasing institutional adoption of its cryptocurrency. U.S. institutional investors are reportedly buying ETH in large sums – resulting in the exponential price increase of the last few weeks. 

Last week, asset manager VanEck applied to launch the VanEck Ethereum Trust, an exchange-traded fund (ETF) tracking Ether’s price performance, according to an SEC filing. If approved, this would be the first Ethereum ETF in the U.S. 

Institutional interest in Ethereum has also been growing globally - in April, the European Investment Bank issued a two-year EUR 100 million digital bond — its first-ever — on the Ethereum blockchain, in collaboration with Goldman Sachs, Santander and Societe Generale. The payment transactions from the underwriters to the EIB were represented on the Ethereum blockchain in the form of Central Bank Digital Currency (CBDC), in a partnership with Banque de France. Also last month, Canada approved several Ethereum ETFs. Ethereum certainly is seen in the same light as Bitcoin in terms of credibility to these institutions – putting it far ahead of any other altcoin in the market.

Many governments around the world are now exploring CBDC initiatives and ConsenSys, a blockchain software company for Ethereum, has been working with governments in France, Hong Kong, Thailand, and Australia on their CBDC pilots. Many other countries are currently in the “exploratory” phase of implementing CBDC’s, most of which utilise the Ethereum blockchain to power the project.

DeFi’s growth remains unabated with more than US$149 billion in Total Value Locked. Most of the action seems to be running on Ethereum, with at least US$70b in its decentralized apps. Even other sectors like insurance and derivatives are growing.  The non-fungible token movement continues to gain popularity, and whether any of those are valuable or not, ETH is needed to move them. 

ETH is somehow finding stars aligning for it at the moment: Gas price worries have largely subsided following the Berlin upgrade, the upcoming EIP-1559 (London) promises further gas cost reduction and a deflationary monetary policy.

For now, Ethereum’s momentum appears to be unstoppable as it transitions from a “proof-of-work” to a “proof-of-stake” blockchain. Since the Ethereum 2.0 Beacon Chain launch in December, more than US$18 billion has been staked in the Eth2 deposit contract. The next major upgrade — London — is scheduled to take place around July 14.

ETH’s price breaking all-time highs on a nearly daily basis is perhaps also caused by investors factoring in some of the lofty promises of ETH2 as the network moves towards the direction of proof of stake, not to mention the continued strong growth of DeFi. Who knows how high it will climb but its adoption and utility certainly justify the current price action.