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Market Talk: Ethereum steals the limelight
04 May 2021
What happened?
Ethereum, the second-largest cryptocurrency after Bitcoin, has been stealing the limelight of late. Prices broke above $3,000 to set a new record high, after rising more than 300% year to date.
Year to date market capitalization of Ethereum (USD)
Why did it happen?
According to some crypto experts, they believe this is a catch-up rally by Ethereum (ETH) to the gains of Bitcoin which rallied late last year, with the rise in interest from institutions. However, with ETH's recent rise, it is now Bitcoin that is now lagging behind. ETH has gained more than 1,400% over the last 1 year vs Bitcoin which has gained more than 500% over the past year. (Still decent gains for both)
Other reasons attributed to the rise of ETH includes
1) The issuance of European Investment Bank’s (EIB) first ever digital bond (EUR 100m 2 year bond) on the ETH blockchain. This sparked a “bullish institutional use case for Ethereum”, following the support by EIB who believed "the digitalization of capital markets may bring benefits to market participants in the coming years, including a reduction of intermediaries and fixed costs, better market transparency through an increased capacity to see trading flows and identity asset owners, as well as a much faster settlement speed." Click here to see how ETH transactions work.
2) Rising popularity of non-fungible token (NFT), which boosted the demand for ETH as most NFTs are part of the ETH blockchain. NFT are "tokens that we can use to represent ownership of unique items." and it can be anything that is digital including drawings, songs, etc, where you buy the ownership of the digital asset. The most well-known NFT so far will probably be the sale of the first tweet by Twitter's founder and CEO, Jack Dorsey, who sold it as an NFT for $2.9 million.
NFTs' popularity surged in recent years as more people buy and sell digital artwork. Most of the NFT tokens are built on the ETH network which enable NFT to work due to the reasons below (as quoted from ethereum.org)
- Transaction history and token metadata is publicly verifiable – it's simple to prove ownership history.
- Once a transaction is confirmed, it's nearly impossible to manipulate that data to "steal" ownership.
- Trading NFTs can happen peer-to-peer without needing platforms that can take large cuts as compensation.
- All Ethereum products share the same "backend". Put another way, all Ethereum products can easily understand each other – this makes NFTs portable across products. You can buy an NFT on one product and sell it on another easily. As a creator you can list your NFTs on multiple products at the same time – every product will have the most up-to-date ownership information.
- Ethereum never goes down, meaning your tokens will always be available to sell.
So will Ethereum continue to rise? We are in the bull camp for ETH as in addition to being a cryptocurrency, ETH actually offers functionalities such as smart contracts which are starting to gain the traction and support from major institutions and sectors. Hopefully as the number of use cases increase, so will the price. Go ETH Go Go Go!
Are you a ETH bull or bear? Let us know in the comments section below!