Ethereum On A Tear

Bitcoin prices continued their rebound Monday, rising about 4% to nearly $59,000. But the world's largest cryptocurrency has been overshadowed lately by its younger sibling, Ethereum.

Ethereum hit a new record high this morning of about $3,324 US. Ether prices have more than quadrupled in 2021, soaring over 340%. Bitcoin has had a great run this year too, doubling in value. The total value of all Ethereum in circulation is now about 379 billion USD. Bitcoin's market value is just under $1.1 trillion.

Bitcoin has soared this year in part due to increased adoption by big institutional money. Musk's Tesla and software firm MicroStrategy have bought bitcoin to hold on their balance sheets and have both been big cheerleaders of the space. Digital payments giants Square and PayPal are letting users buy, sell and hold crypto, too, making onramps for retail investors easier than ever.

But Ethereum has enjoyed an even bigger surge than bitcoin because it is the cryptocurrency of choice for the purchases of many non-fungible tokens, or NFTs -- which have taken the art and broader collectibles world by storm. 

The rally in ether is tied to the recent burst of activity on the network. About seven million new Ethereum addresses—or accounts able to hold ether balances—were created in the first four months of 2021, bringing the total to more than 55 million, according to analytics firm IntoTheBlock. And the dollar value of transactions on the platform totalled $1.5 trillion in the first quarter, more than the previous seven quarters combined.

Ethereum’s price increase also reflects improvements to the Ethereum blockchain, and a growing shift towards "DeFi", or decentralised finance, which refers to transactions outside traditional banking for which the Ethereum blockchain is a crucial platform.

It appears that at first, the rally was really led by bitcoin because as a lot of the institutional investors came into the space, that would be their natural first port of call but perhaps as the rally has matured over the last six months, institutional money has realised the potential of DeFi and want to be an early mover in the space.

Surging DeFi volumes continue to push Ethereum prices higher as investors gain confidence in crypto and see Ethereum as a safe second-place asset.

Additionally, for the two largest cryptocurrencies, the S&P Dow Jones Indices launched its first three cryptocurrency indexes Monday, according to documents reviewed by CoinDesk.

The crypto indexes, S&P’s first, carry ticker symbols SPBTC, SPETH and SPCMC – one for bitcoin, ether and a “MegaCap” combo of the two. An accompanying methodology document stated the trio are using data from partner firm Lukka.

S&P’s crypto indexes are poised to add more visibility to bitcoin and ether data among Wall Street traders hungry to decode crypto price action. The products will compete against existing indexes from Bloomberg and Galaxy.

What Ethereum's run over the last 12 months shows is the power of network effects. The entire space ends up looking into Ethereum or participating on the network. The majority of the smartest people in the crypto space are developing projects on the Ethereum network, plus the diversity of projects make it the one-stop-shop for most crypto realted things. It's not hard to see a future where Ethereum is the train tracks that most (if not all) lending, insurance, DeFi, NFT's, among a growing list of other sectors, run on.

In many ways, Ethereum could dominate everything. And as the network upgrades roll out, the power of the network will be harder for traditional systems to ignore. It’s all looking good for Ethereum!