Ether prices on the Ethereum blockchain have been steadily and quietly carving out new highs as buzz in the crypto has centered predominantly on the fervor around more speculative assets like dogecoin
DOGEUSD,
in recent weeks.
However, for many blockchain enthusiasts, the rise of Ether
ETHUSD,
is a significant development that is driven by the growing importance of the world’s second-largest crypto on the planet behind bitcoin
BTCUSD,
Check out: Ether hits record high, crests $4,000 milestone
At last check, Ether was changing hands at $4,140.95 on CoinDesk, up 5.7% on Monday, with that climb bringing its year-to-date gain to nearly 460%. Ether prices traded at all-time high at $4,213.46 around Monday.
By comparison, bitcoin was flat on the day at $57,444.65, and up more than 97% so far in 2021.
Here’s what investors need to know about the digital asset and its rise:
What is Ether?
Ether is the coin, launched in 2015 by a team including Vitarik Buterin, Charles Hoskinson, and Gavin Wood, that has come to be known for the ease by which software developers can write bespoke programs atop its network. Sometimes these applications are referred to as smart contracts.
Ether is similar to bitcoin inasmuch as it is a digital asset that is decentralized, (i.e., no one party controls it), and uses distributed-ledger technology known as blockchain that records transactions immutably. The blockchain network is supported by a digital-mining community.
Miners are the record-keepers on blockchains like bitcoin and Ether and they are rewarded with coins for their efforts.
How is Ether used?
Bitcoin’s major selling point has been its claim by enthusiasts as a store of value and as a currency to a lesser extent, but Ethereum’s network is viewed by many as a powerful, open-source, decentralized backbone off which a number of applications can be based.
Ether values have been supported partly by growing appetite for nonfungible tokens, or NFTs, and other corners of the nascent digital crypto market supported on the Ethereum blockchain.
Momentum, however, is building around so-called decentralized finance, or DeFi, projects, which are also mostly supported on the Ethereum network.
DeFi are applications and services that can facilitate borrowing, lending and trading crypto assets without an intermediary. It is seen as a possible threat to traditional financial markets, or as an application that could be more readily used to enhance buying, selling and lending on Wall Street.
A research report published on the Federal Reserve Bank of St. Louis’s website recently said that DeFi has some issues with security but if addressed could shake up the financial industry.
“However, if these issues can be solved, DeFi may lead to a paradigm shift in the financial industry and potentially contribute toward a more robust, open, and transparent financial infrastructure,” wrote Fabian Schär, a professor for distributed-ledger technologies and fintech at the University of Basel and the managing director of the Center for Innovative Finance.
“It is little wonder why institutions are getting excited about the technology,” wrote Fawad Razaqzada, market analyst at ThinkMarkets in a Monday note.
“ETH uses blockchain not only for payments but also for storing computer code which can have many real-world applications,” he wrote.
Gaining Ether prominence
The European Investment Bank, a lender owned by European Union member states, issued $120 million worth of two-year bonds last week on the Ethereum network, a first for such a large-scale issuance.
What’s the outlook?
Nigel Green, chief executive and founder of deVere Group, had forecast that Ether would be at $5,000 by today. His prediction so far is a bit off the mark but he has been mostly right directionally.
It’s hard to say where Ether prices go from here but some speculate that momentum is only just beginning.
“The good thing is that it is still only a beginning for this rally as money continues to pour into Ethereum,” wrote Naeem Aslam, chief market analyst at AvaTrade, in a daily note.
“In fact, there is strong evidence that traders and investors are actually liquidating small positions in Bitcoin and putting that money in Ethereum as they believe that this coin is still massively undervalued,” he said.
Ether’s gains make most traditional asset returns this year look mundane. Gold futures
GC00,
are down 3% year to date, while the Dow Jones Industrial Average
DJIA,
and S&P 500 index
SPX,
are up by at least 12% and the Nasdaq Composite Index
COMP,
has gained over 5% so far in 2021.
Highly speculative dogecoin, which is up over 10,000% this year, has drawn much of the attention in the crypto world, lately. However, many investors in blockchain view Ether as a more serious digital asset with more utility than dogecoin.