Ethereum's Price Surge: Factors Driving ETH Above $2,650 and its Dominance in the Smart Contract Industry
Summary:
Between January 10th and 12th, the price of Ether (ETH) rose by 13.5%, reaching over $2,650 for the first time since May 2022. This surge was largely due to approval of the Bitcoin (BTC) spot exchange-traded fund. Despite Bitcoin's price falling over the same period, Ethereum surpassed it with a gain of 27% over the last 60 days. Ethereum’s key competitors experienced setbacks, further driving its price increase. Ethereum also benefited from its 4.3% annualized staking reward and negative issuance rate. A hard fork, scheduled for January 17, is set to significantly enhance Ethereum's technical capabilities. Despite some criticisms of Ethereum, it remains a dominant force in the smart contract industry.
Between the 10th and 12th of January, the price of Ether (ETH) experienced a surge of 13.5%, exceeding $2,650 for the first time since May 2022. This significant gain is attributable to the approval of Bitcoin (BTC) spot exchange-traded fund, even though Bitcoin itself saw a 2% decrease during the same period. Given the current market capitalisation of $322 billion for Ether, investors are wondering whether it can maintain this level.
Over the past two months, the value of Ether increased by 27%, which is greater than Bitcoin's 24% upsurge during the same time frame. This is quite significant, especially considering that the approval of a Bitcoin spot was anticipated to significantly boost its price by attracting new clients who previously could not acquire cryptocurrency directly. Moreover, Bloomberg ETF analysts give a 70% likelihood of an Ethereum ETF being approved by May, which is slightly less than the 95% probability for Bitcoin.
Major asset managers including BlackRock, Fidelity, Grayscale, and VanEck anticipate the U.S. Securities and Exchange Commission (SEC) will make a final decision concerning the Ethereum ETF by May 23rd, however, experts are suggesting that this may be announced sooner since Bitcoin has already set a precedent. For example, some applicants have been given intermediary deadlines by the SEC at the end of January.
Despite the fact that Bitcoin's ETF approval had little effect on its value, Ether's bullish trend seems to have been caused by other factors. Firstly, Ethereum's primary competitors – BNB token (BNB) and Solana (SOL) – experienced a setback following their respective aggressive rallies. Over the week until January 12th, BNB fell by 2% and SOL slid by 3%.
SOL’s positive momentum lost steam following SPL token airdrops, including JITO, BONK, and WIF, which saw their values drop by at least 40%. Also, the increased activity in decentralized applications (DApps) seemed to center around a few projects that had significant token launches, however, this engagement waned after the related snapshots. As a result, investors lost interest in Solana's SOL token.
In the week leading up to January 12th, BNB Chain's active DApps addresses dropped by 61%, with transaction numbers also slipping by 64%, according to DappRadar. Concurrently, Ethereum saw a decrease of just 2.2% in active addresses and volumes declined by a mere 0.3%.
Despite nonfungible token (NFT) markets being less buoyant compared to their 2021 peak, Ethereum remains the clear frontrunner in terms of value, hosting the top collections: CryptoPunks, Bored Ape Yacht Club, Pudgy Penguins, and Azuki. Essentially, those who use Ethereum's DeFi applications and top NFT assets are unfazed by a $6.30 average transaction fee.
Also contributing to Ether's price increase is its 4.3% annual staking reward and a slightly negative issuance rate. Presently, nearly 24% of the total circulating ETH supply is locked up in the network’s validating process, thus heightening expectations for Ether's price. In contrast, Solana’s adjusted staking reward is just 0.8% as a result of its high SOL issuance rate.
Ethereum network is set for a hard fork that could significantly improve its technical abilities. This Dencun fork, which aims at enhanced data accessibility and lower rollup transaction costs, is due for its first testnet implementation on January 17th. Further expected upgrades include account abstraction, which could diminish transaction costs and provide secure social logins.
Ethereum has been repeatedly criticised for its scalability limitations and insufficient base layer privacy solutions, hence, improving access to its second layers for better user experience and cost-effectiveness is crucial. Therefore, Ether's rally above $2,600 appears to be less connected to the spot ETF approval than it initially seems, as it continues to dominate the smart contract sector.
Please note, this article does not offer investment advice or recommendations. Investments and trading moves come with risks, so it is advised that individuals conduct their own research before making a decision.
Published At
1/12/2024 10:15:00 PM
Disclaimer: Algoine does not endorse any content or product on this page. Readers should conduct their own research before taking any actions related to the asset, company, or any information in this article and assume full responsibility for their decisions. This article should not be considered as investment advice. Our news is prepared with AI support.
Do you suspect this content may be misleading, incomplete, or inappropriate in any way, requiring modification or removal?
We appreciate your report.