Will the Ethereum price increase in the future? Let’s look at the factors that could lead to a positive outcome
Ethereum is the second-largest digital currency by market cap, and it has experienced many ups and downs over the years. Despite all of these price fluctuations, Ethereum is still a very important digital currency that has raised the interest of numerous people, and it is one of the first choices that investors want to add to their portfolios. Ethereum is the second largest digital coin by market cap, bringing various innovations in the crypto sphere that have made the ETH prediction go up.
Ethereum is a highly volatile digital asset that can change its price in a short amount of time. This means that its value can either increase or decrease. However, the future looks bright for Ethereum, as its price can rise, driven by many factors. In this article, we will explore a few of them. So, keep reading to find out more.
Ethereum: a powerful force in the crypto world
Ethereum is not only a digital coin but also an open-source and decentralized blockchain that has introduced many innovations to the world. Vitalik Buterin is one of the co-founders of Ethereum who came up with the idea that Bitcoin could have more applications. He showed his ideas to the Bitcoin developers, but his proposals were not approved. This is why Vitalik decided to create his own platform, Ethereum.
Ethereum has a native token, Ether, and even though all cryptocurrencies are volatile, ETH is viewed as one of the most flexible and stablecoins. Plus, it has more use cases than Bitcoin, which is one of the reasons why Ethereum has grown so popular. Ethereum is also a platform that encourages the functionality of plenty of applications, such as NFTs, smart contracts, DeFi, dApps, and much more.
What are the factors that impact ETH price?
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Bitcoin dominance
Bitcoin is the largest cryptocurrency in the crypto world, meaning it also dominates the market and influences the prices of the other altcoins. This is why, when the value of Bitcoin rises, so does one of the other altcoins, and vice versa. Ethereum is a direct competitor to Bitcoin, and some believe that ETH could even surpass Bitcoin in the future. Ethereum has even managed to flip Bitcoin in July 2021 regarding the number of daily active addresses on the blockchain. If this happens again, then the price of Ether will spike.
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Ethereum is considered a legacy coin
Now, there are many digital coins in the crypto world that offer different use cases to users. However, Ethereum and Bitcoin are considered legacy cryptocurrencies that are better for long-term holding. These digital coins have fewer risks than the newer alternatives as they have been in the market for a longer period and have withstand all the changes that have occurred.
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Upgrades
Ethereum is a platform that wants to improve constantly, and this is why it has undergone many upgrades and will continue to do so in the future as well. Initially, the upgrades on Ethereum were separated into four main parts: Homestead, Frontier, Serenity, and Metropolis.
Ethereum 2.0 was another important upgrade meant to improve the blockchain’s functionality. Additionally, this upgrade aims to fix all the network bottlenecks and maximize the number of transactions. This upgrade marks the shift from a PoW consensus mechanism to a PoS model, and it also focuses on improving transaction speeds and reducing energy consumption. Ethereum 2.0 could support up to 100,000 transactions per second, making the platform more decentralized and secure, which could also increase the price of Ether.
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The increased interest in NFTs
The increased interest in NFTs can also push the ETH prices upwards, which is a bonus, as NFTs are created mainly on Ethereum. NFTs represent unique digital assets that represent numerous things, including collectibles, pieces of art, and even photos or videos. NFTs and Ethereum have quite a strong relationship, as NFTs need Ethereum to exist, and if the NFT industry booms, so will the price of Ether.
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Rise of DeFi
Ethereum has also become more popular due to the rise of the DeFi sector, which wants to revolutionize the financial industry. Various DeFi applications are created on the Ethereum platform, which pays gas fees on the blockchain. These gas fees are the payments that users receive as compensation for the computing energy needed to validate and process all the transactions on Ethereum. DeFi wants to create an alternative financial system that will offer improved advantages over the traditional options, including better accessibility. As DeFi applications are mainly built on Ethereum, they can push prices upwards.
What determines the value of Ethereum?
The value of Ethereum’s native token is determined by demand and market supply. For example, if demand increases, the price of Ethereum will also benefit from an increase, while if the supply is larger than the demand, prices will go down. Ether’s supply is dynamic, as it doesn’t have a limited supply, unlike Bitcoin, which will only issue 21 million digital coins.
Are there any risks when investing in Ethereum?
Ethereum is a digital currency, so it is normal for it to be exposed to a lot of volatility, which will cause prices to fluctuate quickly. So, yes, investing in Ethereum comes with some risks that need to be considered from the start, as only in this way can all individuals benefit from bigger returns. However, Ethereum is the second-largest cryptocurrency by market cap, meaning it is a more secure alternative than the other digital coins.
Still, anyone wanting to join the crypto bandwagon must have a strong knowledge of crypto and research all the required information before entering this space. Additionally, those who invest in digital currencies must stay updated with market trends and everything that happens in this space to reduce the risks associated with digital currencies.
