Ethereum ETH

About Ethereum

Ethereum is one of the world’s most popular cryptocurrency platforms and is fast-becoming a rival to the more well-known bitcoin. Launched in July 2015, Ethereum is a decentralized cryptocurrency maintained by blockchain technology in much the same way as bitcoin is.

Ethereum differs significantly from Bitcoin as it is not just intended as a digital currency, but as a virtual computing platform.

Ethereum expands the blockchain concept introduced by Bitcoin to include automated actions using so-called smart contracts, which are executed on the Ethereum platform. These scripts are intended to make Ethereum the basis for decentralised, blockchain-based applications, also known as ‘dapps’. Applications can range from voting systems to payment methods, which can be developed and run on the Ethereum platform without any third party involvement.

• Ethereum was launched in 2015 by programmer Vitalik Buterin
• Ethereum's token is called ether and is used to pay for computing resources
• Ethereum aims to be more than a payment network
• The decentralized cryptocurrency enables the development of decentralised aaplications and smart contracts
• Ethereum is the second largest cryptocurrency by market capitalization

How is the price of Ethereum determined?

As with bitcoin, Ethereum’s price is prone to fluctuations as the market is still very much in its infancy.

Ethereum is traded on so-called crypto exchanges. The Ethereum price is is a market price formed from supply and demand. This means that the current price always indicates the price at which an equal number of people want to buy (= demand) and sell (= supply). The Ethereum price rises when the demand increases or the supply is reduced. Conversely, the price falls when supply rises or demand falls.

Crypto exchanges basically operate on the same principle as exchanges for the stock or foreign exchange market. One big difference, however, is that cryptocurrencies are traded around the clock and also on weekends. This means that the Ethereum price can rise or fall on the weekend.

As with other digital currencies, investors have started to investigate Ethereum with more scrutiny as they look to diversify their portfolios during an uncertain economic period, exacerbated by the impact of the Covid-19 pandemic.

Value has been driven from endorsements by prominent investors, too. American entrepreneur, Mark Cuban, recently revealed he has a lot of Ethereum, saying it’s as close as you can get to a ‘true currency’.

Ethereum Price History

Ethereum was released using an ICO (Initial Coin Offering) in 2014. The following year, it was being traded on a variety of exchanges for around $2.

In 2016, a hacker managed to steal $50m via a vulnerability in a third-party project called the DAO, and the value of the currency slumped by a quarter. Since then, the cryptocurrency has steadily re-grown with its first spike in value taking place in 2017.

It started the year with tokens worth $7 but within 12 months, it reached more than $1,000, enjoying increasing legitimacy from bigger corporate investors. This was helped by the formation of the Enterprise Ethereum Alliance, an initiative connecting larger companies, such as Microsoft and JPMorgan, with blockchain vendors.

As a result of the cryptocurrency market crash in January 2018, the Ethereum price collapsed by around 94% and dropped to a low of around $88.

It has since rebounded and continued to enjoy growth in both, price and users, hitting the $2,000 mark for the first time in its history in 2021. Upgrades in the form of Ethereum 2.0 are currently in the works and this is expected to have an impact on the price and market supply as well.

Ethereum Price Prediction

Various methods can be used to value financial assets. We would like to briefly discuss the two of the most important methods, fundamental analysis and technical analysis.

Fundamental Analysis

The aim of fundamental analysis is to determine the intrinsic value of a financial asset in order to determine a fair price. Fundamental analysis makes use of a wide variety of economic and market data. This data is often referred to as fundamentals.

In the case of Ethereum, such fundamentals could be, for example, collaborations with large companies, increased use of the Ethereum platform and smart contracts or numerous new Ethereum-based blockchain projects or ICOs.

Technical Analysis

The aim of technical analysis, on the other hand, is to predict the future price of an underlying asset based solely on its historical development. Technical analysis uses generally accessible data on price history and trading volume.

However, technical analysis does neither offer an exact prediction of future prices. It is much more about determining the probabilities for the future development of the price of an asset in order to forecast favorable times to buy and sell.

An exceptional Tool for technical analysis is TradingView.

What is the difference between Ethereum and Bitcoin?

Bitcoin is a virtual currency, as is Ethereum. However, Ethereum also acts as a decentralized network, meaning you can create and run applications on its blockchain.

These functions are currently unavailable with bitcoin. The amount of ether tokens is also limitless; bitcoin will only ever see 21 million coins released.

The cost of transactions is different, too. With bitcoin, transactions are limited by block size and compete equally with each other. However, Ethereum transactions depend on the complexity and storage requirements.

Bitcoin was created as an alternative to national currencies and aspires to be a store of value, whereas Ethereum was set up to be a platform that facilitates contracts and applications through its own currency.

Benefits of Ethereum

The ultimate goal of Ethereum’s creator was to create a decentralized suite of financial products.

As this infrastructure operates without a central bank or authority, it is open to anyone and provides greater access to financial products, such as bank accounts or loans. There are different elements behind Ethereum to ensure it works effectively without a regulator in place. These are:

Smart contracts

Smart contracts are pieces of computer code that are capable of outlining and managing certain conditions which need to be met for a transaction to take place. They help facilitate the trade of money, content or anything deemed to be worth something. These contracts are created by the Ethereum Virtual Machine (EVM) and act like a self-operating computer program once they are on a blockchain. The process is automated by code and any information surrounding a transaction is shared on the blockchain network. This means they can be approved without a third party.

Dapps

Dapps, or decentralized applications, are pieces of open source software that use blockchain technology, created by groups of smart contracts. Any tokens on an Ethereum network which are not represented by ether require a dapp. This enables developers to create Ethereum applications and, as they are open source, they are available for scrutiny by market players. However, changes must be agreed by the majority of dapp users. With this kind of infrastructure, there is great potential for these networks to develop quickly, driven by the innovation of its user base.