Ether Prices Reached Their Latest High Above $4,800—What Drove These Gains?

Ether Prices Reached Their Latest High Above $4,800—What Drove These Gains?

Ether prices have risen to their latest zenith, notching a fresh record as the digital currency, along with its platform Ethereum, benefit from widespread interest.

The ether token, the second-largest cryptocurrency in existence when measured by total market value, reached $4,865.57 earlier today, CoinDesk data shows.

Upon rallying to this level, the digital asset was up 560% year-to-date, additional CoinDesk figures reveal.

Following this upward movement, ether pulled back, falling below $4,500 and trading closer to $4,600 at the time of this writing.

[Ed note: Investing in cryptocoins or tokens is highly speculative and the market is largely unregulated. Anyone considering it should be prepared to lose their entire investment.]

When explaining these latest gains, market analysts pointed to several factors, including growing use of the Ethereum platform and the dwindling amount of ether on exchanges.

“ETH has been on a surge all year, and this new all-time high shows that the projects built on the ethereum blockchain are only continuing to gain momentum,” said Jesse Proudman, cofounder and CTO of crypto hedge fund Strix Leviathan.

“From NFTs to DeFi protocols, ETH is where most of the development is happening,” he noted.

“For further evidence of this, one only needs to look at total value locked, which is a measure of assets pledged to DeFi platforms, TVL is at an all-time high of nearly $114 billion,” said Proudman.

Konstantin Boyko-Romanovsky, founder and CEO of Allnodes Inc., also commented on this subject.

“The rise of the DeFi sector directly correlates with the price rise of Ethereum,” he stated.

“Currently, 112.78 Billion is locked on DeFi projects, and 70% of all these projects are on the Ethereum network. This is interesting because just a year ago to date, the total value locked (TVL) in DeFi was 25 Billion,” added Boyko-Romanovsky.

“So if price increases in Ether a year ago were pushing DeFi adoption, it might be reasonable to assume now that the tables have turned.”

In other words, the DeFi ecosystem is currently affecting ether prices, instead of it being the other way around.

Exchanges’ Key Role

Several analysts also spoke to the supply-demand conditions on exchanges that offer digital currencies, emphasizing how they are affecting cryptocurrency prices.

Andrew Rossow, an internet and technology attorney, commented on this.

“The overall lack of supply on exchanges is a major factor” in driving recent gains, emphasizing that ether is being burned very quickly.

Sean Rooney, head of research at Valkyrie Investments, also provided input on this situation.

“The supply of ether held on exchanges has been on a steep downtrend from 20 percent of total supply in August 2020, down to just over 12 percent today,” he stated.

“This makes sense, with the explosion of the DeFi ecosystem where Ethereum is still the dominant chain,” added Rooney.

David Keller, chief market strategist at StockCharts.com, spoke to sharp gains that ether has enjoyed this year, as well as the implications of this strong appreciation.

“In previous years, Bitcoin has been the only cryptocurrency that many investors have followed. However, the rise in Ether in 2021 shows that the space is maturing to the point that coins other than Bitcoin are entering mainstream awareness,” he said.

“In fact, Ethereum is up over 500% year-to-date compared to Bitcoin's 126% return over the same period.”

“The outsized returns in Ether suggest that investors are becoming more aware of the larger coins other than Bitcoin,” Keller stated.

“They are also gaining an understanding of the implications for Bitcoin and Ether related to DeFi, compared to the limited utility of smaller ‘altcoins’ that have much lower utility.”

Disclosure: I own some bitcoin, bitcoin cash, litecoin, ether, EOS and sol.

Source