Since the launch of this cryptocurrency in 2015, Ethereum price has seen both swift growth and volatility. The platform’s native cryptocurrency, Ether (ETH), is now the second most widely used cryptocurrency in the world after Bitcoin, and some crypto experts attribute this to Ethereum’s unique ecosystem and its support for decentralized financing (DeFi). Vitalik Buterin created this cryptocurrency platform specifically with DeFi in mind; Ethereum’s infrastructure supports lending, borrowing, and staking protocols or “smart contracts.”

The Demand for Smart Contracts

Smart contracts have seen high demand; they are essentially scripts running on a blockchain network, storing a digital agreement and then carrying out various actions once specified conditions have been met. In this way, smart contracts are self-enforcing, allowing investors to manage and exchange digital assets anonymously and automate future transactions without needing third-party brokers.

Despite the name, these actually are not “smart” programs (like AI) but scripts, and they aren’t “contracts”; they are automated transaction protocols. But what they are is very popular because of their efficiency and accuracy; they leave little room for human error. That, in turn, has made the Ethereum blockchain platform popular, with the rise in DeFi and NFTs driving its network activity.

A Rising Value

In fact, though Ethereum’s initial coin offering (ICO) price was approximately just thirty cents, within two years after the cryptocurrency launched, it reached an ICO of $1,400 during the 2017 bull run. Some have speculated that Ether is set for a breakout in 2025, with some analysts predicting a price as high as $10,000.

The Factors That Affect Ethereum Price

What drives such bullish predictions? To a large extent, analysts with an eye on that $10,000 mark are anticipating changes to the regulatory environment for cryptocurrency. Yet this early in the year, much is uncertain. However, there are multiple tailwinds that have been accelerating the rise in value for this currency. Besides the growing demand for smart contracts, macroeconomic trends such as inflation, shifting interest rates, and investor sentiment have also driven Ethereum network activity and Ether price (though, naturally, they can also drive price down when investor sentiment becomes more bearish).

Ethereum has been well-positioned to both inspire and capitalize on bullish sentiment because its network upgrades have allowed it to keep pace with demand.

On September 2022, Ethereum shifted from a proof-of-work (PoW) to a proof-of-stake (PoS) model. PoW and PoS are both blockchain consensus mechanisms that validate transactions across a distributed database, but the difference in computing power (and the degree of network security provided). The shift to PoS, dubbed “Ethereum 2.0,” has helped reduce Ethereum’s energy footprint and has decreased the network’s transaction times, allowing it to scale up to much larger numbers of transactions.

Finally, the rise of Web3 applications and the growing exchange of NFTs have both made Ethereum attractive. This blockchain platform can support decentralized apps, and Ethereum has achieved dominance in the NFT market through platforms like OpenSea.

Ether and Bitcoin

Interestingly, though Ether and Bitcoin differ in market perception and in their supply models (with Bitcoin capped permanently at 21 million coins, creating scarcity, while Ethereum remains uncapped), the price ratio between them has tended to be stable. The two prices have been closely correlated, though minor variations in the market may favor one slightly over the other, creating opportunities for crypto investors to trade between them. This has contributed to the perceived stability of Ethereum, and if 2025 does bring clarity to the regulatory environment for cryptocurrency, that, combined with anticipated further upgrades to Ethereum’s network capacity, may contribute to the growth that more bullish investors hope for – though only time will tell.

This content is for educational purposes only and is not to be used as investment advice. As with all investments, there is risk, and the past performance of a particular asset class does not guarantee any future performance. Please consult a finance professional for financial advice. The views, thoughts and opinions expressed in this contributor content belong solely to the contributor and do not represent the views of Lee Enterprises.

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