Ethereum (ETHUSD) has seen an unexpected upswing this week, reaching two-year highs on hopes that spot ETH ETFs from firms such as BlackRock will receive SEC approval later this year.
Investors are enthusiastic about non-fungible tokens and Ethereum’s potential to decentralize business functions. But what exactly is Ethereum?
1. It’s a Stablecoin
Ethereum prices are influenced by several fundamental factors. Rising demand for the token as both digital currency and an engine to power decentralized applications (dApps) can increase its value; significant upgrades to Ethereum network scalability, security and sustainability improvements also spur demand for tokens.
Alternately, ETH price fluctuations may correlate to those of fiat currencies such as USD or other popular cryptocurrencies like BTC/ETH/XRP. Stablecoins such as Tether that are backed by fiat money seek to maintain their fixed values over time.
Stablecoins are cryptocurrency assets designed to retain their value over time and some even offer interest on deposits, similar to a bank account. Numerous dapps provide this service and accept various collateral forms; however, their annual percentage yields depend on real-time supply/demand and market conditions.
2. It’s a Utility Coin
Ethereum is the second-largest cryptocurrency by market cap and its price is determined primarily by demand and supply; investor sentiment also plays a part. Rising demand for DeFi services and NFTs can drive up ETH prices due to it being used as the primary platform in these sectors; new smart contract platforms may threaten its dominance leading to increased competition and lower adoption rates, thus negatively affecting its price.
Other variables can also have an impact on ETH, including gas fees for blockchain transactions which are paid in form of ether. Furthermore, validators on the network receive payment in this currency too.
As with other cryptocurrencies, Ethereum (ETH) can be exchanged for fiat currency and digital assets such as other cryptocurrencies; additionally it serves as an integral part of non-fungible tokens (NFTs), Decentralized Finance platforms and Metaverse networks.
3. It’s a Platform Coin
Ethereum is more than a crypto coin; it serves as a platform for numerous other cryptocurrencies and applications. Released in July 2015, its blockchain enables users to create decentralized smart contracts.
The Ethereum network also facilitates various tokens, which serve as digital representations of assets and services. Fungible tokens like USDT and WBTC act similar to US dollars while non-fungible tokens (NFTs) can record ownership of real world assets like real estate properties.
Ethereum, as the second-largest cryptocurrency by market cap, is widely traded across both centralized and decentralized exchanges, used as both a store of value and peer-to-peer payment method, used as collateral against token generation on its blockchain, as well as receiving rewards through staking. All these attributes contribute to driving demand for and price growth of this crypto asset.
4. It’s a Currency
Ethereum is one of the most coveted cryptocurrencies on the cryptocurrency market and its price can often depend on a variety of factors such as:
Announcements by the Ethereum foundation regarding upgrades and improvements can have a dramatic effect on ETH prices, particularly if more people begin hosting smart contracts hosted on its platform; demand could increase and lead to more demand for ETH.
Last, but certainly not least, is the value of the US dollar as it can have an effect on Ethereum to USD prices. Cryptocurrencies have increasingly become popular as international payment mechanisms due to their speedy settlement times and convenience.
Be mindful that ETH prices can sometimes fluctuate as fuel for other blockchain tokens used for voting or tracking assets such as commodities and fiat currencies. Therefore, finding an optimal time and date to conduct transactions will maximize profit potential and lead to maximum return.
