Introduction to the Ethereum price
When Ethereum launched in 2015, the price of its token was never a subject for debate. Instead, all the talk was of the blockchain-based smart contract system that it had ushered in and what it could change. This changed in 2017 when it enjoyed a 14,440% rise, and there remains a core of Ethereum supporters who fervently believe that in time it will eclipse the value of Bitcoin.
In this guide we take a look at what affects Ethereums price and how it has developed over the years.
Ethereum’s price today
For a piece about Ethereum’s price, there’s only one place we can start – Ethereum’s price.
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It is crucial to keep in mind that the accuracy of live Ethereum prices may vary across different sources. Our data is sourced from a reputable provider that constantly updates information from multiple leading exchanges, ensuring the most accurate prices possible.
However, other less reliable sites may only use data from a few low-volume exchanges, leading to fluctuating prices that do not accurately reflect the broader market.
What affects the price of Ethereum?
The price of Ethereum is influenced by a combination of internal and external factors. Internal factors include Ethereum’s design and tokenomics, while external factors include its adoption rate and the overall performance of the cryptocurrency market. In this analysis, we will examine each of these factors individually.
Internal factors
Use case
Ethereum has grown from its humble beginnings to become the most trusted smart contract platform in the entire crypto space. Many projects start off on Ethereum before migrating to their own blockchains, making it a kind of incubator for new projects. Of the tens of billions of dollars that are locked up by users in decentralized applications (dApps), Ethereum caters for over 50%, making it the dominant player in the dApp space.
Ethereum has been the home of the biggest sub-sectors of the crypto space, including the ICOs, the DeFi movement, and NFTs. While Ethereum has more competition than ever before, it has seen off dozens of ‘Ethereum killers’ in its time.
Supply
Since its switch to a proof-of-stake consensus mechanism, Ethereum is on the way to becoming one of the only deflationary cryptocurrencies in the space. This means that over time, more ETH will be burnt per transaction than is generated through staking.
This deflationary model will very likely play an important part in maintaining its value in the future.
Upgrades
Ethereum 2.0, which was initiated in 2022 and will be finalized in 2023, is set to revolutionize the cryptocurrency. As more facets of the upgrade get rolled out, Ethereum will become faster, more able to cope with heavy use, and the cost of transacting will greatly reduce.
This combination of factors, combined with its continued popularity and expanding use cases, will almost certainly have a positive effect on the price over time.
External factors
Growing popularity
Ethereum used to be the preserve of dApp designers and those with a strong knowledge of blockchain. However, as the space has grown, more and more people outside of the blockchain space are understanding what it can do.
This increased understanding has led to institutions becoming as interested in it as they are Bitcoin, interest which will only increase thanks to its transition to Ethereum 2.0.
Speculation
Ethereum is just as susceptible to speculative price moves as any other cryptocurrency. It wasn’t just the ICO boom that helped ETH run from $10 to $1,450 in 2017 – speculators helped get it there too!
Bitcoin
Alt coins like Ethereum may not like it, but their short-term price movements can be dictated by Bitcoin. Any huge move from Bitcoin in either direction often results in a similar move for Ethereum, regardless of anything that’s going on with the platform or the coin itself.
Events
Ethereum knows the impact of real world events on its price more than most cryptocurrencies. In June 2016, only a year or so after it had launched, a hacker managed to steal 3.6 million ETH from the development pot, a theft that sent the price of ETH crashing 50%.
It would of course recover and go on to do great things, but this is a warning that real world, unforeseen events can have a massive impact on price.
Can you trust Ethereum ‘experts’?
The concept of an “expert” in Ethereum or cryptocurrency is a controversial one, especially when it comes to price predictions. While many individuals have a deep understanding of how Ethereum works, their predictions about its price movements are often influenced by their personal biases – those who are bullish on Ethereum tend to forecast a positive future, while those who are bearish tend to predict its decline.
It is important to be skeptical of these extreme viewpoints and to instead seek out opinions that are based on tangible evidence, rather than emotions. If you are looking for an expert opinion on Ethereum’s price potential, it is crucial to research the person or organization providing the opinion to ensure that their analysis is based on facts and not personal bias.
It is crucial to remember that Ethereum, like all other cryptocurrencies, can be impacted by price fluctuations in Bitcoin, which is itself affected by the same economic and political conditions that affect major indices such as the S&P 500 and the NASDAQ.
This means that to gain a better understanding of Ethereum’s price potential, it is essential to pay attention to analysts who discuss the financial market as a whole and not just the crypto market.
These experts may not specifically mention Ethereum or Bitcoin, but any significant events or policy decisions that affect global markets, such as changes in interest rates, will likely have an impact on Ethereum down the line as well.
How does the future look for the Ethereum price?
Prediction, as they say, is a mug’s game, so we won’t try and guess the price of Ethereum here. However, we do want to help you understand the factors that can influence Ethereum’s price in the short-term and long-term, which we’ll do here.
Short term factors
Market cycle
We’ve already mentioned Ethereum’s extraordinary run in 2017, but it didn’t do too badly last time round either, going from $110 in March 2020 to $4,725 at the peak 18 months later. Since then however, the crypto bear market has taken its toll, with Ethereum touching $1,000 in July 2022.
The latter half of 2022 saw Ethereum’s price flatten out however, suggesting that the worst may be over for it.
Ethereum 2.0 rollout
We’ve already mentioned how the Ethereum 2.0 upgrade will likely improve the desirability and tokenomics of Ethereum in the long term, but this needs to be accomplished first. So far all the upgrade measures have gone smoothly, but it just takes one false move and the value of the coin could be seriously compromised.
Geopolitical situation
The world is currently experiencing a period of financial uncertainty not seen since for decades, none of which is cryptocurrency’s fault. As a result, people and institutions have less disposable income and capital to invest in assets like Ethereum, which are considered luxury or high-risk investments.
Additionally, institutions have been cut off from low-interest loans, which in turn leads to less speculation in the market from big players. Until this improves, prices will not pick up in a sustained way.
Long term factors
Convincing developers
Ethereum has been the go-to smart contract platform since its launch in 2015, but its upgrade hasn’t pleased everyone. Some developers and commentators believe that it is now less secure and less decentralized, and other platforms such as Polygon (ironically an Ethreum offshoot) are seeing increased mainstream adoption.
Ethereum needs to assure developers and users that its new formula tastes as good as classic Ethereum to ensure that its success will continue.
Mainstream adoption
It’s all well and good for those inside the crypto space to build everything on Ethereum, but if the general public don’t start using the dApps being built on it then it will soon hit a ceiling.
This isn’t down to Ethereum itself but rather these dApps, but if another few years goes by and decentralized apps haven’t moved on or seen wider adoption then the desire for Ethereum may falter over time.
Is Ethereum a security?
Ethereum has never been considered a security by the Securities and Exchange Commission (SEC) or the Commodity Futures Trading Commission (CFTC), but its change to a proof-of-stake consensus mechanism has changed that.
The heads of both the SEC and the CFTC have said that ETH may now be considered a security given how new coins are generated. The impact of such a ruling could be massive, with stakers in the U.S. either required to register as brokers or quit altogether.