The price of the largest by capitalization altcoin exceeded $3.5 thousand for the first time since mid-May. What factors provoked the growth of cryptocurrency and when its value will reach its historical maximum?
On the morning of September 1, Ethereum’s price exceeded $3,500 for the first time in the last 3.5 months. In August, the altcoin increased in price by 42%, while its capitalization rose to $416 billion, according to CoinGecko. RBC-Crypto experts named the reasons why Ethereum’s value began to skyrocket and gave a forecast for the altcoin’s price in the future.
What happened to altcoin in August
On August 5, the Ethereum network released a London updаte that completely changed the mechanism for charging transaction fees. Some of the commissions that miners used to receive as rewards are now burned off.
More than 158,000 Ethereums worth $557.4 million have been burned on the cryptocurrency network since the updаte was activated, according to ultrasound.money. The average burn rate per minute is 4.06 ETH ($14.1k).
Token burning is the destruction of a certain number of tokens to reduce their number in circulation. This method is used to fight inflation and increase the value of cryptocurrency. All coin burning transactions are recorded on the blockchain as a transaction, so anyone can verify that the coins were destroyed.
On August 27, it became known that there was a critical error in the network of the largest altcoin by capitalization. Ethereum developers released a bug-fixing updаte that prevented a serious branching of the blockchain.
Growth Factors
Ethereum is now a more sought-after coin among big investors than bitcoin, according to Mikhail Karkhalev, a financial analyst at the cryptocurrency exchange Currency.com. In his opinion, there are several reasons for this:
The NFT, DeFi and GameFi booms are boosting demand for ETH, as the bulk of the projects are launched on the Ethereum blockchain;
Ethereum acts as a hedge asset for investors who invest in the tokens of various projects;
Trading volumes on Ethereum are smaller than on bitcoin, accordingly – the volatility is higher, the risk is higher, and thus the opportunity to earn is also higher;
The crypto market as a whole is growing. Bitcoin traditionally “drags” other coins with it;
The development of the project, successful coldforks, the gradual transition to the PoS algorithm also form a positive attitude of investors to the coin.
Great potential
The rapid growth of Ethereum is due to optimism among market participants about the further development of the project, says director of the cryptocurrency exchange service Alfacash Nikita Soshnikov. The price of altcoin has not yet returned to the historical maximum, which was observed in May of this year ($4.3 thousand). Because of this, the cryptocurrency’s potential has not yet been exhausted and the coin remains undervalued, he believes.
The course of Ethereum grows amid the general decline of investors’ interest to bitcoin, which failed to consolidate above $50 thousand and keeps “tramping” below that level, Soshnikov noted.
“Tired of the lack of any clear upward movement on bitcoin, investors have turned their attention to Ethereum”, the expert added.
Bitcoin was up 34% in August, while Ethereum was up 42%. At the same time, the share of the main cryptocurrency in the market decreased by almost 5%. Altcoin, on the other hand, managed to increase its market share of digital assets by more than 1%.
Ethereum went on the offensive
The range of $3.3-3.4 thousand, in which Ethereum was in August, was the last key resistance zone, says Karkhalev. After overcoming this zone, the altcoin actually went on the offensive to updаte the historical maximum. At this stage, further movements will only depend on the mood of the market, believes Karkhalev. According to him, if the market continues to grow, Ethereum will be close to updating its historical maximum at the end of September.
“I doubt we will see new highs in September. I think both bitcoin and Ethereum will set price records in November and December”, the expert predicted.
Long-term movement
By the end of the year Ethereum has all chances to reach the mark of $5 thousand, believes Soshnikov. In his opinion, the further growth of altcoin will largely depend on the success of Ethereum 2.0 updаte roll-out in 2022. If the updаte is successful, the altcoin rate could exceed $8,000 as early as next year, the director of cryptocurrency exchange service Alfacash predicted.
“The long-term forecast for Ethereum at the level of $10,000 seems to me quite realistic. I would even say that this is not an optimistic, but a moderate scenario”, Soshnikov added.
Ethereum has already established itself as a reliable blockchain ecosystem with all the necessary functionality for DeFi, the expert said. As DeFi will obviously grow on the background of the demand for financial decentralized products among the wide range of users, Ethereum will also grow, forecasts Soshnikov.
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