It has been a long time since there was much excitement around the price of Bitcoin but the major cryptocurrency has finally managed to break the mythical $10,000 mark as the week comes to an end. The major cryptocurrency has sparked into life, but in the past six to eight weeks, there has been an altcoin season growing.
Ethereum, the second biggest coin by market cap, is one of the coins driving altcoin season, and this coin has been pushing forward thanks to its imminent upgrade to Ethereum 2.0 which is headed to be an all-important one. Many eyes are on Ethereum for this upgrade, and the hopes are it will push the price of ETH up too.
Now, with this latest Bitcoin rally, Ethereum has managed to push up to its own yearly high of $322, and it seems the stars are aligning for the price of the coin to keep pushing forward. The previous high this year for Ethereum came in February just before the Mid-March market crash.
But, there are three major factors to consider when viewing why Ethereum is rising up. These include DeFi breaking out in 2020 and becoming the new hot topic in crypto; Ethereum 2.0 and the excitement that is bringing to the market, and finally the rising demand for Ethereum which is linked to both of the previous two reasons.
DeFi on the up
DeFi has quickly become the major thing in crypto to watch this year. The idea of decentralised finance is not only exciting as a use case for people wanting to get into crypto, it is a good station for crypto to fall under because of all it can do. Since May, the total value locked in DeFi protocols has increased nearly four-fold to $3.75 billion.
A lot of the DeFi action has fallen to the Ethereum blockchain, which is of course a good thing for ETH, but also a highlight as to the troubles that ETH 1.0 is having as the blockchain has been under pressure.
As the network clogs, users are required to pay higher gas or transaction fees to process their payments or smart contracts. John Todaro, the head of research at the institutional trading platform TradeBlock, said on Twitter that the growth of DeFi would push the price of ETH higher in the long-term:
“Look back to a report we published in 2019 around the impact DeFi could have on #Ethereum demand. We have not seen that run-up in $ETH price yet, but there is no doubt the rapid growth in demand for DeFi will push ETH price higher in the longer term.”
A bigger market
The Ethereum market has seen high options and spot demand of late. This week, the Deribit team said it had reached a record high for ETH options volume and open interest. Deribit accounts for 93% of the Ether options market in terms of open interest, tweeting:
“We have a new record high for ETH Options volume and open interest! With a peak 24hr volume of $49 million, the Deribit ETH options OI sits at $241 million (and currently 93% of the global Ethereum market share)!”
One to watch
Ethereum has always been promising, but it has also always struggled. The new upgrade that is starting in the next few weeks looks like it might make the project realise its promises, and for that, realise the value of its tokens.
Ethereum has had a good 2020, but it could get a lot better if the hype around the upgrade is followed through but the actual work set to be done. If there is a successful upgrade, the demand for ETH could skyrocket.