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What affects the Ethereum price?

The price of Ether largely depends on the popularity of the rapidly growing DeFi (decentralized finance) sector, which is based on the Ethereum blockchain, and those projects that use the altcoin to realize their goals. Ether is also heavily dependent on the overall state of the cryptocurrency market and the price of Bitcoin, Cardano and other leading tokens.

What affects the Ethereum price?

The price of Ether largely depends on the popularity of the rapidly growing DeFi (decentralized finance) sector, which is based on the Ethereum blockchain, and those projects that use the altcoin to realize their goals. Ether is also heavily dependent on the overall state of the cryptocurrency market and the price of Bitcoin, Cardano and other leading tokens.

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Major Ethereum price drivers

Supply and demand

The future of Ether price will stem from its utility as an alternative payment method and a digital asset. Although it’s difficult to estimate the demand for cryptocurrencies precisely, Ethereum has great potential to lead the altcoin market with unprecedented growth in decentralised finance (DeFi), ETH 2.0 and the prolonged 2021 crypto market rally.

Attractiveness to investors

Ether is a popular means of payment for many DeFi and blockchain-related cryptocurrency projects. The coin is used to enter into smart contracts and as a means of payment in decentralized applications (dApps). Due to the popularity of the Ethereum blockchain as an infrastructure for projects and startups, investors from a variety of sectors are investing heavily in Ether itself.

Global macroeconomic development

As the world is constantly shifting towards a digital ecosystem, Ethereum continues to glean more growth opportunities due to its wide applicability. Given that Ether’s major purpose is facilitating smart contracts and dApps, many experts believe in the token’s potential. The demand for decentralised finance provides strong confidence that the cryptocurrency can reach extreme highs in the next five years.

Ethereum summary

What is Ethereum?

Ethereum is an open-source blockchain-based technology that allows users to send cryptocurrency to anyone for a small fee. It is also used as a platform for 1,900 tokens, including 47 of the top 100 cryptocurrencies by market cap. The blockchain powers decentralised applications, also known as dApps.

Ether (ETH) is a native cryptocurrency generated by miners as a reward for adding new blocks to the blockchain and releasing them to the market.

Who invented Ethereum?

Russian-Canadian programmer Vitalik Buterin first introduced the idea of Ethereum in his white paper in 2013 with the aim of building decentralised applications. Buterin believed that there was a necessity in a scripting language for applications and offered to develop a new platform.

Buterin recruited several other specialists as co-founders of his own currency, and the first sale of ETH tokens took place in the summer of 2014. Сlose to $18 million was raised as a result.

How do you store Ethereum?

Like any other cryptocurrency, Ethers can be stored in different crypto wallets. You can choose between a third-party wallet or a wallet provided by an exchange. Although they may grant easy access to your funds and speed up the trading process, that can be risky as various exchanges sometimes get hacked.

The Ethereum platform also enables you to create a personal wallet, where you and only you will have full control over the private key and your funds. You can also choose a hot (software apps for quick exchanges and purchases) or cold (special hardware devices for long-term coin storage) wallet (or even both) to store your Ether coins safely.

Why invest in Ethereum: ETH use cases

  • Smart contracts and Apps There are approximately 1,900 dApps on the Ethereum network and their number is constantly growing. The use of smart contracts in banking will immensely speed up financial transactions and facilitate many financial operations.

  • Speculative asset The Ethereum price has always been volatile, providing high potential for speculation. As the second-most-valuable and popular cryptocurrency among traders, ETH regularly presents attractive profit opportunities due to its price fluctuations.

  • Store of value Ether is the second-largest cryptocurrency in the world and the main altcoin available on the market. Some believe it will soon play a much bigger role in the global economy and in international trade, which makes Ether a lucrative investment option for savvy investors.

Ethereum price chart: historic data

Since its inception in 2015, Ethereum has experienced significant price swings. During the first five years of its existence, the platform has made massive progress, and is currently running about 2,000 dApps. As of today, the market cap of its native crypto Ether is $420bn.

Ethereum performance
Developer Vitalik Buterin and his team present the idea of Ethereum to the public. They manage to raise $18 million for its development.
The Ethereum network launches on July 30, 2015, initially called Frontier. Ether’s first recorded price was $2.77 on August 7, 2015, when the crypto was added to the Kraken exchange.
Ether’s price quickly rises after the launch of a more stable version of the protocol (Homestead). As a result, the cryptocurrency reached a serious milestone of $15 per coin for the first time. The cryptocurrency climbs even higher to $21 on the success of the DAO project, a pioneer of the coming ICO era. That same year, Ethereum split into two parts, Ethereum Classic and Ethereum, after a controversial hard fork caused by an attack on DAO.
Ethereum soars to $95 per coin as the cryptocurrency's popularity grows among investors and dApps developers. The ICO hype also contributes to increased demand for ETH, and the price eventually climbs to $400. ETH’s price jumps further to $800 after the Byzantium network upgrade.
ETH reached its highest level to date, trading at around $1,400. The price of the crypto dropped back down to $85 soon after the ICO rush came to an end.
DeFi emerges as the largest industry within the Ethereum network. MakerDAO raises ETH 1.86 million in funding. The network goes through the Constantinople hard fork in February, and an eighth update, called Istanbul, is activated.
The network is upgraded to Ethereum 2.0 to address scalability and transition to a new blockchain scheme (stacking). Activity in the DeFi sector increases once more. Value transferred via DeFi applications reaches a record $4.9bn in Q2.
Ether climbs to a new all-time high of $4,165. Total mining revenue reaches record highs of $1.3bn in February, with the coin also reaching a billion total transactions during the same month. The DeFi space continues to mature and the demand for NFTs, most of which exist on the Ethereum blockchain, has further increased interest in the world’s second-largest cryptocurrency.

Invest in Ethereum: FAQ

How does Ethereum work and what makes it unique?

Ethereum revolutionised the concept of a blockchain platform for smart contracts. Smart contracts, representing programs which automatically execute an agreement between parties, were created to eliminate the necessity for trusted intermediaries between contractors. These promised to cut the cost of transactions and increase their reliability.

According to Ethereum co-founder Gavin Wood, Ethereum's blockchain was designed as “one computer for the entire planet” with the aim to make any program censorship-resistant, less prone to fraud and more robust by running on a globally distributed network of public nodes.

Besides smart contracts, Ethereum’s network is capable of hosting other cryptocurrencies through its ERC-20 compatibility standard. Over 280,000 ETC-20-compliant tokens were launched in 2020, including USDT, BNB and LINK.

How many Ethereum coins are there in circulation?

By the end of summer 2020, there were almost 112 million Ethers in circulation, 72 of which were issued along with Ethereum’s first-ever Genesis block.

Of the initial 72 million, 60 were poured into the crowdsale that fuelled the project, while the remaining 12 were allocated towards Ethereum’s development.

The rest of the coins went out as rewards for miners. In 2015, the reward was 5 ETH per block. It then dropped to 3 ETH in 2017 and 2 ETH by 2019. It takes about 13-15 seconds to mine a block of Ethereum, and unlike Bitcoin, the total supply of Ethereum is not limited.

Why will Ethereum succeed?

Despite some drastic price swings throughout its history, analysts believe that Ethereum is on a path to ultimate success. Although there’s never a definite answer to “should I invest in Ethereum”, you can track the crypto’s performance in real time and follow experts’ opinions and the latest Ethereum price predictions.

According to WalletInvestor’s ETH price forecast for 2020-2025, Ether's price will rise to highs of $4,200 by the end of 2021, shooting up to $15,700 in 2025. CoinSwitch gives an even more bullish prediction, expecting Ethereum to reach a price of $2,480 by 2022 and $3,844 by 2025.

Who accepts Ether as payment?

Although Ether isn’t as widespread as Bitcoin, many companies are already accepting it as a means of payment.

Two of the world’s major payment systems – PayPal and Visa – recently announced that they would allow the use of cryptocurrency (including Ether) on their platforms.