Ever since its introduction in July 2015, Ethereum has steadily grown to become the second most popular platform for smart contracts.
It is possible to write on Ethereum code that can send money and also build applications that can be accessed from any part of the world. As the platform grows, its prizes also become stable.
Most crypto asset speculators consider Ethereum to be one of Bitcoin’s competitors that rightfully deserves attention. Unlike BTC whose focus is mainly on security, it is more interested in smart contracts. In recent times, the platform has been registering impressive results relative to Bitcoin price.
In a recently published research by Delphi Digital, Ether recorded a 10% price increase. The report was quick to note that this positive price increase does not necessarily mean that altcoins were finally catching up with the world’s major crypto.
However, it is an indication that Ethereum is slowly recuperating from unimpressive performances for the whole of 2018 and partially 2019.
2019 seems to be a better year for Ether investors. For instance, those who had invested in 2018 would be 87% by this time. However, from the start of 2019, they would have earned 24%.
Ethereum Price Turnaround
Ethereum has in recent times had a positive price increase which is in line with the positive changes that Bitcoin faces. However, the altcoin is yet to catch up with the incredible pace set by BTC.
Whereas BTC gained 170% year-to-date return in USD, ETH only registered 50%. This is quite a huge underperformance given that there was a time when Ether was thought to be able to overtake Bitcoin.
Speculators might have to wait much longer for that to happen given that by July this year, ETH price declined to levels lower than what has ever been recorded since March 2017. It might be recovering now but that is not enough to convince one that Ether can really take on BTC.
There is no doubt that Ether has done a pretty good job of asserting itself as the fundamental coin within the crypto ecosystem. Catapulted by the idea of initial coin offering (ICO), Ethereum exploded from $10 to more than $1,385. Throughout 2018, the crypto experienced its toughest year and had a hard time holding on to the $400 mark.
Today things are slightly better but not as good as they were at the $1,385 peak performance. This digital asset was coined after numerous attempts to establish something that can really give BTC the competition that it deserves.
To do so, it had to be infused with unique technology and features. One such is ‘smart contracts’ which continue to impact the extent to which ETH grows.
Smart contracts are an agreement encoded within an application. For instance, if you default on making a payment to the bank, the car automatically locks. Thus, both parties would be strictly obliged to fulfill commitments on a digital level. The fact that no one can break smart contracts makes them quite appealing.
There are a couple of factors that play an important role in the price changes that we see ETH go through. These are mining profitability, regulation, and exchanges.
Whenever Ethereum is mined, the miners are awarded by getting designated coins. Successfully mining requires one to have top-notch equipment given that the process is highly competitive. With each mining, the coins reduce further.
Currently, the profit levels for ETH mining stand at $80 per month. This represents a 700% return on the electrical charges for mining.
When Ether has a profit level of $300 to $400, miners are highly incentivized to sell at high prices.
Mining continues to become quite a hard thing to do as more people join. There have been talks about major tech firms creating GPUs designed specifically for mining crypto.
The more the number of participants in the mining process, the lower the profitability of mining. This means that fewer people will be willing to sell their coins. They will hold on to them until when the prices are favorable.
Based on mining profitability, one can take the true price of Ethereum to be lying somewhere between $100 and $300.
One cannot ignore the impact that regulators have on cryptocurrency prices. Governments across the world, mainly China and South Korea, have taken the lead in influencing how far ETH prices can rise.
In the case that the government has negative laws, the lasting impact is a decline in prices. For instance, the People’s Bank of China triggered unfair market shifts when it issued a directive barring payment companies from working with crypto exchanges. The country further caused more market tremors when it banned ICOs and close all crypto exchanges.
At the same time, South Korea has recently been positively affecting ETH prices. The country placed banks under serious scrutiny regarding their relations with crypto exchanges. Traders were also hit with massive fines as a result of operating anonymous trading accounts. This quite an unfair move for a country that has traditionally motivated the uptake cryptocurrencies.
If ETH prices are to be more stable, there will be a need for regulators to keep off the market. The essence of cryptocurrency is to get rid of the watchful eyes of a central authority. Thus, it makes no sense for the regulators to still want to continue impacting the industry.
As ETH gains more attention, it strains the normal operations of exchanges. To begin with, several exchanges have temporarily halted the registration of new users. Bitfinex is one of them which has not registered any new users since December. This is a strategy it uses with the intention of preserving the current trading, support, and verification experiences for its vast and well-established user base.
Kraken, a US-based crypto exchange, recently launched a software upgrade that ended up taking days as opposed to the scheduled 2 hours. This stopped trading for an extended period, negatively impacting prices.
When exchanges make certain moves, the result will either be a positive impact on prices or a negative one.
A Look Into the Future of Ethereum
One question that most experts ask themselves is where ETH is headed. Currently, one cannot confidently draw a trajectory for Ethereum considering the many variables that impact its price. At the moment, regulators are policing ICOs and formalizing this new framework for lending.
Despite having had a bad year in 2018, 2019 seems to be a good one and is headed in the right direction. When the impact of regulators is well-managed, ETH will definitely solidify its position as a major competitor to Bitcoin. But beating the latter will take a bit longer than expected.
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