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Ether is trading at all-time high. The digital currency is now worth $1,432.
Ether to All-Time High
Ether just registered a new record high. The number two cryptocurrency hit a price of $1,432 today following a surge of interest in the markets in recent weeks.
It’s the first time Ether has broken this price level since January 2018. Towards the end of the infamous 2017 crypto bull run, Ether memorably surged around 100% in a month, hitting $1,420 in mid-January.
It then suffered a price fall of 94% over the course of the so-called “crypto winter”—the period from 2018 through 2019 when prices slumped following a year of mania across the markets.
In December 2018, it was trading just above $80. As such, many disregarded the project as a write-off along with the numerous failed ICO projects it helped create. Ethereum fuelled much of the speculation of 2017’s Initial Coin Offering frenzy, as new projects raised capital by collecting Ether from investors. Many turned out to be scams, casting a dark light over Vitalik Buterin and those in Ethereum’s inner circle.
Ethereum, the Foundation to DeFi
From late 2018 through 2019, Ethereum became the base layer for several new protocols that have since been coined as staples of the “DeFi” umbrella. Uniswap, Synthetix, and Aave among others were built on top of Ethereum and have captured a significant user base along with Ethereum. Ether was still trading at only $130—91% off its all-time high price—in January 2020, but it saw huge gains as DeFi exploded through the year.
In 2020, it increased in price by 483%, outpacing Bitcoin’s 300% gain. Meanwhile, the Total Value Locked in DeFi protocols on Ethereum soared from $600 million to over $15 billion. It’s now at $24.85 billion according to DeFi Pulse.
The launch of Ethereum 2.0 in late 2020 also led to renewed interest in its native asset; users had to accumulate 32 Ether to participate in staking.
The price of Ether crossed $600 when the network’s Beacon Chain was deployed on Dec. 1, the launch date that was set if the contract accrued a minimum threshold of 524,288 Ether. There’s now 2,620,642 Ether staked inside the contract, worth around $3.66 billion at publication.
Ether’s Rise Through 2020
While Ether saw a price rise thanks to DeFi and the launch of Ethereum 2.0, it was also affected by the macroclimate and change in attitudes towards Bitcoin. Prompted by a phase of intensified money printing in response to Coronavirus, the original cryptocurrency’s value proposition as “digital gold” was strengthened in 2020. Among its biggest proponents were companies like MicroStrategy, which has invested more than $1 billion, celebrated investors like Paul Tudor Jones, and insurance companies like MassMutual.
Around the same time, PayPal also announced it would be adding support for Bitcoin and Ether among other crypto assets. S&P Dow Jones also revealed it would launch cryptocurrency indices in 2021.
The favorable climate for the cryptocurrency space led to Bitcoin breaking $20,000 for the first time ever in December. It then surged over 100% in the space of three weeks, while the price of Ether also significantly increased. The two assets are closely correlated: when funds flow into Bitcoin, it often leads to price increases for Ether shortly after.
Ether experienced a particularly violent upward move at the start of January. On Jan. 3, it surged 40% in a day from around $800 to $1,100. It’s been steadily increasing in price since then.
Both Ether and Bitcoin have been on a parabolic run, leading some to question whether the highs are sustainable. Even in bull markets, crypto assets can experience drops of 50% ahead of another wild run. On Jan. 11, both assets suffered a major correction of over 20%, though data showed that high net worth investors quickly bought the dip.
EIP-1559 on the Horizon
In addition to the ongoing development of Ethereum 2.0, the network will implement EIP-1559 in the future. EIP-1559 is an “ETH buyback” proposal that was first put forward by Vitalik Buterin, with the help of Eric Conner. It involves burning the majority of Ethereum gas fees, which in turn reduces the supply of Ether. It could turn Ether into a deflationary asset, meaning that it would become more scarce over time.
With the increased attention surrounding the cryptocurrency space adding to the various developments within the Ethereum ecosystem, it’s possible that Ether could experience higher highs in the future. Experts have suggested that Bitcoin could hit six digits on a long term time horizon, though Ether tends to receive less mainstream attention. Still, some investors following the crypto market have set big targets for Ether’s run on this market cycle.
Ether is currently trading at $1,432. Ethereum’s market cap is just short of $161 billion.
Disclosure: At the time of writing, the author of this feature owned ETH, SNX, and AAVE, among a number of other cryptocurrencies.