Ethereum is the second-largest digital coin by market cap, which has attracted the attention of investors worldwide because it is more than a digital coin as it is also a blockchain that supports plenty of innovations, including DeFi, smart contracts, dApps, and NFTs. But like it happens with many other digital coins, Ethereum is highly volatile, and a lot of factors drive its volatility and make its price fall and rise repeatedly. From the moment it was launched, Ethereum price USD has had a great evolution and now the digital coin is known worldwide by investors for all the applications it brings.
Ethereum was developed by Vitalik Buterin, who wanted to create a better blockchain and overcome the challenges posed by Bitcoin. Even though Ethereum is volatile, it still has solid use cases and ambitious plans for decentralized applications. In this article, we will analyze the factors that make Ethereum a volatile asset and those that affect its price, so keep reading to find out more.
Domination of Bitcoin
Bitcoin is the largest digital coin by market cap, which has been in the market for the longest period, and because of this fact, it influences all the other digital coins. So, every time the Bitcoin price rises so does the value of the other digital coins, and vice versa when the value of Bitcoin drops. This means that Bitcoin also affects Ethereum’s value and makes its prices rise and drop. Some say Ethereum might overthrow Bitcoin at some point in the future because BTC has a limited supply, which is not the case with ETH, as it is unlimited.
Platform Upgrades
Ethereum has undergone several upgrades over time, all of which have improved its functionality. These improvements have also raised the Ethereum price, which will continue in the future. For 2024, Vitalik Buterin has created an Ethereum Roadmap containing all the upgrades the platform will undergo, making it more secure, cheaper, and updated.
The last Ethereum upgrade was The Dencun Upgrade, which went live on March 13th. This upgrade enhanced the data availability and diminished the costs for layer-2 transactions. Additionally, it introduced the concept of proto-danksharding, which enhances the data availability on Ethereum.
Possible ETH ETF
Bitcoin was again in the spotlight this year when the SEC approved a spot Bitcoin ETF, simplifying things, as individuals will not need to buy the cryptocurrency directly but use a regulated financial company. Since this event, the BTC price has risen tremendously. After this event, many individuals think that the next one to come is an ETH ETF, and the news around this event can push Ethereum’s price upwards.
Investor Sentiment
Investor sentiment also increases Ethereum’s volatility, as when individuals believe that the price of Ethereum will increase, they will most likely want to invest in Ethereum. If the demand increases, this will impact Ethereum’s value and utility because it will create bullish behavior. At the same time, issues on the Ethereum platform will have a bearish reaction.
The Growth Interest of Decentralized Finance (DeFi)
People have also started to become interested in the DeFi sector, which allows people to make several financial services, including borrowing, lending and trading directly on blockchains, without needing intermediaries.
As Ethereum is one of the best blockchains, it hosts the majority of DeFi applications, and as the interest in this sector has grown, so has the demand for Ethereum because these applications need Ether, the native coin of the platform, to operate. In the past, the surge in the DeFi market from 2020 to 2021 led to an increase in the value of Ethereum, which emphasized that Ethereum had a vital role in this ecosystem.
Regulatory Framework
Regulations also have a huge role in the crypto market, including the value of Ethereum. For example, a positive regulatory framework will lead to a market boost, while strict ones will have a negative impact, decreasing its price. So, investors who want to add cryptocurrencies to their portfolios must pay attention to all the news regarding the regulatory developments in Europe, the United States and Asia to know if this news will impact Ethereum’s price.
A Look at the Price History of Ethereum
Vitalik Buterin had in mind the creation of a blockchain that was based on smart contracts back in 2013, as he realized that the Bitcoin blockchain could improve a lot in this way. He proposed his ideas to the Bitcoin developers, but they weren’t accepted, so he looked for ways to launch its network, Ethereum. Launching Ethereum was made with the help of an ICO (Initial Coin Offering) that occurred in 2014, which was a successful project, as the team raised the amount of money needed to launch Ethereum. So, in 2015, Ethereum started trading on crypto exchanges for around $2.
Then, the price of Ethereum started to increase in 2017, when ETH began to be traded at around $10, but then it increased even more, and in January 2018, Ethereum surpassed $1,400. Additionally, during the bull market of 2021, Ethereum’s value increased to $5,000, proving that Ethereum is here to stay and represents one of the best options for individuals worldwide. This thing continues to be valid up to this day, as Ethereum has remained the 2nd largest digital currency by market cap, having a market capitalization of $400 billion.
The Bottom Line
Ethereum is one of the most important players in the crypto space, and it has gathered the attention of plenty of people due to all the innovation it has brought. Ethereum is a highly volatile asset whose price is influenced by a lot of factors, including the growth of DeFi applications, the wider adoption of blockchain, and the market dynamics. So, anyone interested in investing in digital coins should pay attention to all these elements so that no one will be disappointed.
