The price of ethereum (ether) has hit a new all-time high amid predictions that an impending supply shortage will force the price up even higher.
The cryptocurrency reached above $1,500 (£1,100) for the first time in its history on Wednesday following a 10-month price rally that has seen its value rise by more than 1,000 per cent since last April.
Its fortunes have mirrored those of other major cryptocurrencies over the last year, including bitcoin and Cardano (ADA).
The market surge has been boosted by increased institutional interest during the pandemic, which has seen major investors turn to cryptocurrency in an effort to diversify their portfolios during a time or economic uncertainty.
Retail investors have also turned to crypto assets, as more and more apps offer easy ways to purchase bitcoin and other cryptocurrencies.
The prolonged gains have resulted in many investors withdrawing their funds from cryptocurrency exchanges to store safely offline in the hope of continued price rises.
This trend is forcing the value up even higher, according to market analysts, who tell The Independent more gains could be likely if the “dwindling supply” continues.
“Ethereum now finds itself in the spotlight after data showed withdrawals of ethereum from exchanges is once again accelerating,” said Simon Peters, a cryptocurrency analyst at the online investment platform eToro.
“Ethereum is increasingly being locked away in DeFi (Decentralised Finance) protocols, whilst investors are also moving ethereum to their own personal cold storage to hold for the long-term.
“It’s clear from the price that this diminishing supply is feeding through quickly to prices. With institutions expected to add further to their positions, we expect the price of ethereum to push higher from here.”
Both bitcoin and ethereum remain extremely volatile and continue to see wild price swings on a near-daily basis.
A recent research note by the Bank of Singapore’s chief economist, Mansoor Mohi-uddin, suggested that bitcoin and other digital cryptocurrencies could ultimately replace traditional safe haven assets like gold and silver.
Bitcoin has a fixed supply of 21 million coins but it is estimated that only 4.2 million are in constant circulation.
Market analysis firm Glassnode calculated at the end of December that roughly 14.5 million bitcoins are classified as illiquid.
“Our analysis shows that currently 78 per cent of the circulating bitcoin supply can be classified as being illiquid,” the firm wrote in a report.
“A trend that has been increasing over the course of 2020 and paints a potential bullish picture for bitcoin in the upcoming months, as less bitcoin are available in the network to be bought.”