This week, the world’s second biggest cryptocurrency by market cap knows as Ethereum(ETH) peaked over $3,200.
Break it down
Many Ethereum boosters have referred to it as the next internet—or Web 3.0—because of the programmable nature of the underlying blockchain. It’s essentially one big computer. Ether is the crypto that runs on top of the Ethereum blockchain, an open-source, distributed global computing platform that powers dapps (decentralized apps), smart contracts (more in a sec), decentralized finance (DeFi), and non-fungible tokens (NFTs).
I have heard about DeFi before. What's it?
DeFi protocols let users issue debt, take out loans, or collateralize their crypto holdings without a central intermediary. It’s alternative financial infrastructure, as one author noted in a journal published by the Federal Reserve Bank of St. Louis (yep, the central bank).
But why's ETH's rallying at this time?
Well, no one has all the answers to this particular question but here are the ones we know:
1. Buzzword terms like NFTs and DeFi are gaining more traction, judging by the volume of products, active wallets, and funds deployed. The total value locked in DeFi protocols has grown by tens of billions of dollars this year.
2. Rising demand from newcomers, including retail traders and institutions. Traditional institutions, such as Visa and the European Investment Bank, have announced Ethereum-based projects.
3. Crypto, more generally, is in a bull market. Ether is gaining ground relative to bitcoin, which could be a function of more investors becoming aware of the currency.
4. The Ethereum blockchain is undergoing an upgrade to ETH 2.0, which switches from the computing-intensive proof-of-work system to proof-of-stake. This upgrade promises to reduce network congestion, boost network capacity, and reduce “gas” prices (transaction fees).
Ethereum in a strong position in the market
It was only last November that bitcoin passed $15k and we remember when ETH dipped below $100 in the pandemic-induced March 2020 market crash.
While ETH’s price is unlikely to pass BTC’s, its market cap could. Ether currently sits at ⅓ the market cap of BTC. The latter is down from 70% of total crypto market cap at the start of the year to 46%, while ETH now sits at ~15%. SOURCE