Ethereum, the blockchain project that ushered in the age of smart contracts five years ago last week, made a rapid push towards $400 the past few days, and topped a new two-year high. But, what is it that has been driving the interest in Ethereum again, and why is Ether benefiting from this?
Ethereum has always been an important project in the cryptocurrency space, it has never had the same adoption or interest as Bitcoin has achieved, but outside of the financial stakes, it has proved blockchain is a technology for the future.
In more recent times though, it has shown its ability to be important to the financial stakes in the ever growing DeFI ecosystem. And more than that, Ethereum is looking to upgrade and become a better project now that it has had five years to establish itself.
These are some of the factors that have seen the coin rise in price by 75% as the price rallied from $222 to $400 in the last two weeks alone. Additionally, this rise is also part of the reason why many believe an altcoin season is brewing.
DeFi building up
The DeFi space has had a really good year thus far. The space has seen exponential growth for a number of projects as the realisation of what can be achieved by DeFi becomes more clear. Ethereum fits into this role and is proving to be a conduit for it.
However, DeFi is in a dangerous palace as it could quickly turn bearish as investors look for ways to profit off its decline as well as its rise up.
The explosive growth of the DeFi market in a short period led many DeFi-connected tokens to surge rapidly. In July, investors seemingly sold off DeFi tokens and other small market cap altcoins, moving back to Ether and Bitcoin.
On August 1 Ether price reached a 2-year high as it surged to around $400 but this has traders warning against a potential pullback. In fact, crypto-trader Edward Morra said:
“Yeah, parabola coming out of another parabola is a sight to behold tbh. Also, this isn’t sustainable and will correct. If you are new to this space – buy dips, don’t FOMO at the top.”
One of the biggest talking points around Ethereum for the past year has been its move to the next generation — Ethereum 2.0. This is a major upgrade for the project that will see it change its entire consensus mechanism and aim to make it more of a performance blockchain.
When fully launched, ETH 2.0 would gradually eliminate miners from the network and reward users for participating in the network. The incentive system would enable users to earn a yield on their Ether holdings over a long period.
Kelvin Koh, the co-founder of a venture capital Spartan Black, recently suggested that every phase of Ether would strengthen Ethereum. Koh said:
“Every phase of ETH 2.0 over the next 2-3 years brings Ethereum closer to its final state and will be catalysts for ETH.”
Of course, Etheruem has been driving, and benefits, from the altcoin season that looked to be growing in the wake of Bitcoin being a little dull in the volatility stakes. Ethereum has always been one of the major altcoins in the market, and although tightly linked to Bitcoin, it also can lead altcoin surges.