Ethereum’s Future: A Glimpse Into What Lies Ahead

Thanks to its impressive price fluctuations, Ethereum has been one of the most talked-about cryptocurrencies in recent years. While it's not uncommon for cryptocurrencies to experience volatility, Ethereum's price swings have been particularly notable. This has left many investors and traders wondering about the factors behind Ethereum's fluctuations. In this article, we will delve into some critical reasons why Ethereum's price has been so volatile and explore the various factors contributing to its movements.

Ethereum is a blockchain system that operates in a decentralized and open-source manner. Its cryptocurrency, Ether, has a significant role in the platform. Ethereum provides a platform for a host of other cryptocurrencies and also facilitates the execution of decentralized smart contracts.

The idea of Ethereum was laid out in a whitepaper by Vitalik Buterin in 2013, and the project was funded through a public crowdsale in 2014. The team raised $18.3 million in Bitcoin, selling over 60 million Ether for $0.311 per coin. Since then, the ROI on Ethereum has been impressive, with an annualized rate of over 270%, nearly quadrupling the investment made in 2014.

The blockchain officially launched on Jul 30, 2015, under the prototype "Frontier." Since then, Ethereum has undergone several updates, including "Constantinople," "Istanbul," "Muir Glacier," "Berlin," and most recently, the "London" hard fork on Aug 5, 2021.

Ethereum aims to be a worldwide platform for decentralized applications, allowing users to write and run software resistant to censorship, fraud, and downtime.

Following the collapse of FTX, the prices of BTC and ETH experienced a decline, which caught the attention of investors. As of Dec 13, 2023, Ethereum is trading at approximately $2,200, which marks a decline of about 55% since its all-time high of $4,891 in November 2021.

Source: Statista

Let's delve into the factors influencing the price of Ethereum.

The Rising Popularity of NFTs

Ethereum's most popular use case is NFTs or non-fungible tokens. From 2018 to 2020, the market cap of NFTs worldwide increased almost ten-fold. These digital assets use blockchain technology to create a distinct code that is linked to a digital file, making it possible to differentiate the original file from any potential copies. NFTs are widely used in crypto art, but they are also used in gaming, sports, and collectibles.

Ethereum's Future Tied to the Booming DeFi Industry

Decentralized Finance (DeFi) has revolutionized the financial industry by eliminating intermediaries between parties in a transaction, and Ethereum has played a crucial role in facilitating this revolution. The price developments on Ethereum are intricately tied to the world of DeFi, where technologies like smart contractor Uniswap, money lender Dharma, market protocol Compound, and crypto wallets like Coinbase Wallet have gained immense popularity in recent years. Unlike Bitcoin and Ripple, Ethereum is not just a currency, but an open-source software platform for blockchain applications. Ether, the cryptocurrency used within the Ethereum network, is the backbone of DeFi, and Ethereum's future developments are inextricably linked to the success of this industry.

Ethereum Upgrades

The journey towards achieving a fully functional Ethereum 2.0 involves several milestones and phases, each bringing in innovative features and functionalities to the network.

The roadmap comprises three primary phases, namely:

Phase 0: Beacon Chain

Phase 1: The Merge

Phase 2: Sharding

Sharding is the third significant phase of the upgrade, which introduces horizontal database scaling. This improvement seeks to reduce data storage expenses by reducing hardware requirements, thereby allowing anyone to become a validator.

How the roadmap is defined:

Source: @VitalikButerin

To sum up, Ethereum has set a new benchmark in the world of cryptocurrency with its open-source blockchain system that operates in a decentralized manner. Despite experiencing substantial price fluctuations, Ethereum has established itself as a leader, giving rise to numerous decentralized apps and smart contracts. Ether, the platform's in-house cryptocurrency, has produced impressive returns since its launch in 2014, showcasing the profound impact that Ethereum has had on the crypto space.

Disclaimer: The opinions expressed in this article are for informational purposes only. This article does not constitute an endorsement of any of the products and services discussed or investment, financial, or trading advice. Qualified professionals should be consulted prior to making financial decisions.