Do you want to uncover the hidden factors affecting the Ethereum price?
If so, you have come to the right place. No matter who you are – an investor, trader, or someone who wants to grow money fast, you must know what causes the price of Ethereum cryptocurrency to go up and down.
This article will examine the extensive ten factors that can affect the Ethereum price.
We will uncover what steals the spotlight when determining Ethereum’s value.
So, grab a seat and get ready to know what factors influence Ethereum’s price. It will help you navigate the ever-changing landscape of cryptocurrency and also assist you in deciding when to sell and when to buy ETH tokens to gain a potential benefit.
Overview of Ethereum
Ethereum is the second-largest cryptocurrency after Bitcoin in terms of market value. Ethеrеum has emerged as a front runnеr, captivating thе attеntion of invеstors, tradеrs, and tеchnology еnthusiasts alikе. As thе second-largеst digital currеncy by markеt capitalization, Ethеrеum’s pricе fluctuations have become a subjеct of grеat intеrеst and speculation.
Ethereum is trading at around $1,895 per ETH token, with a market capitalization of $0.23 trillion as of August 2022. Ethereum’s price has seen significant fluctuations, rising to record highs and falling to lows within short periods.
Ethereum’s price has seen significant fluctuations, rising to record highs and falling to lows within short periods.
Howеvеr, accuratеly prеdicting thе futurе value of Ethereum is a complеx еndеavor influenced by various potential factors.
We’ll explore some of thе kеy potential factors affecting the ETH pricе prеdictions, shеdding light on thе multi-facеtеd naturе of this captivating digital assеt.
10 Factors Affecting The Ethereum Price – Overview
- Economic principles of supply and demand of ETH coins.
- Findings of the previously conducted formal investigation.
- Media hype and public sentiments around Ethereum.
- Regulatory changes in Ethereum (ETH) over a certain period.
- Prices of other top cryptocurrencies such as Bitcoin.
- Major technology advancements related to Ethereum.
- Cross-border economic conditions in the crypto market.
- Changes in ETH-USD Prices.
- Whale manipulation.
- Geopolitical tensions within the crypto trade.
Principles of Supply and Demand of ETH in the Crypto Market
The basic economic principles of supply and demand significantly impact Ethereum’s price.
On the supply side, mining rewards play an important role. Ethereum miners are rewarded with upgraded Ethereum tokens for their calculated efforts to verify transactions and secure the network. The issuance of new tokens through mining affects the total supply of Ethereum. Furthermore, the token burn phenomenon, which regularly removes many tokens from circulation, can also affect supply.
On the demand sidе, thе incrеasing adoption of Ethеrеum across various industries and thе еmеrgеncе оf nеw sеrvicеs are helping to increase the dеmand. As morе individuals and businesses usе Ethеrеum for smart contracts, dеcеntralizеd applications, or othеr purposеs, the demand for Ethеrеum will increase.
Furthеrmorе, markеt intеrеst, and sеntimеnt play a role in influencing dеmand. Positivе nеws, dеvеlopmеnt, or invеstor intеrеst could еnticе morе individuals to invеst in Ethеrеum, incrеasing dеmand. Thе imbalancе bеtwееn supply and demand for Ethereum could cause its price to rise. Whеn demand exceeds supply, thе price increases as buyеrs compеtе for thе numbеr of tokеns availablе. Convеrsеly, if supply еxcееds dеmand, pricеs may fall as sеllеrs try to get rid of their excess tokens.
- Higher demand drives prices up as more people want to buy Ethereum. Lower demand conversely depresses prices.
- Limited supply also pushes prices up, as there is less Ethereum available to meet demand. An increase in Ethereum’s supply would put downward pressure on its price.
- Ethereum’s circulating supply in 2022 stood at 120,212,024 ETH, up from 116,313,215 ETH in 2021. This increased supply has contributed to downward price pressure.
Recent trends say that the total supply in the market and demand among investors is one of the potentially vital factors affecting the Ethereum price as a whole.
Formal Investigation and Robustness Are Crucial Factors to Consider
The formal investigation conducted before is also very important to consider. The graphical evidence with a formal estimation considers that prices, computing power, and networks are endogenous variables jointly determined at the equilibrium.
As such, the graphical evidence might portray a deceivingly strong positive relationship between them. The dynamic ordinary least squares (DOLS) regression model developed by Stock and Watson (1993) was utilized to overcome this analytical challenge, similar to prior work by Lettau and Ludvigson (2001) along with Lustig and Van Nieuwerburgh (2005).
Our estimations demonstrate that, on average, the market valuations of major mineable cryptocurrencies such as Bitcoin and Ethereum have a significant correlation with their hashing power and network usage.
Aligning with existing research (e.g. Corbet et al. 2018, Li et al. 2018, Makarov and Schoar 2018), the analysis also uncovers some temporary dislocations where cryptocurrency prices diverge from their long-term equilibrium based on technical fundamentals.
See the figure below:
Prices and Computing Power of Ethereum
Media Hype and Public Sentiment
Media coverage and public sentiment around cryptocurrencies can also affect Ethereum’s price.
- Positive media hype and growing public interest increase prices as it attracts more investors.
- Conversely, adverse publicity can diminish demand and push prices down.
- A Finder survey found that positive news events like cryptocurrency exchange listings and corporate partnerships increased cryptocurrency purchases for 40.3% of respondents.
- Prices fell across crypto markets in 2022 amid high-profile collapses like TerraUSD, wiping out $1.3 trillion in value.
Factors influencing cryptocurrency prices, like regulatory crackdowns, exchange hacks, and high-profile scams, often generate negative sentiment that depresses prices across cryptocurrencies, including Ethereum.
The good or bad news about Ethereum can significantly impact market sentiment. Positive news, such as endorsements from influential individuals, partnership announcements, or major developments, can excite and optimize investors. This increase in positive sentiment could bring in buyers and increase the price of Ethereum.
Conversely, negative news, such as a security breach, regulatory concerns, or allegations of market manipulation, can create fear and uncertainty, leading to lower demand and price movement for Ethereum. Monitoring social media sentiment and news sentiment analysis can provide valuable insights into market sentiment and public opinion on Ethereum.
This information can be incorporated into price prediction models to help assess the potential impact of social media and news sentiment on the future of Ethereum prices. It’s important to note that social media sentiment and news sentiment can be fickle and changeable. Thus, analyzing and verifying data from multiple sources is essential to understanding market sentiment accurately.
Regulatory Changes in Ethereum (ETH)
Regulatory developments regarding cryptocurrencies have an impact on ETH prices.
- Stricter regulations around cryptocurrencies reduce their appeal for some investors, lowering demand and prices.
- On the other hand, favorable regulations like legalizing cryptocurrencies lead to higher adoption and market prices.
- Countries like India proposing crypto bans caused prices to slump by as much as 25% in 2021.
Factors affecting the Ethereum price point to regulation as a major influence. As the regulatory environment evolves, it can create volatility in Ethereum’s price.
Competition from Other Cryptocurrencies
Competition from other cryptocurrencies like Bitcoin and Litecoin can impact Ethereum’s market share and price.
With the emergence of thousands of altcoins, the prices of other major cryptocurrencies affect Ethereum. For instance, a rising Bitcoin price lifts overall crypto market sentiment, spilling over into Ethereum pricing.
On the other hand, a falling Bitcoin price due to factors like mining unprofitability also drags down Ethereum. If these alternatives gain ground as preferred investment assets over Ethereum, it lowers demand and price for Ethereum.
Ethereum maintaining its competitiveness leads to higher adoption and prices.
As per one report, Ethereum’s market cap stood at 18.7% of the total crypto market as of August 2022, down from over 20% in 2021.
Factors affecting the Ethereum price include retaining its position as the second largest cryptocurrency by market capitalization behind Bitcoin.
Let’s see the graph below to understand.
Bitcoin Vs. Ethereum Price In 2021
As per the above graph, Ethereum, the cryptocurrency with the second largest market valuation, has seen its price surge over 503% in 2021, significantly outpacing Bitcoin’s 95 percent gain over the same period. This meteoric price performance has led Ethereum’s total market capitalization to reach nearly half of Bitcoin’s market value.
JPMorgan, a US banking giant, claims Ethereum is a better buy than Bitcoin.
A survey from Independent.co.uk also says that 52 percent of investors invested in Ethereum 2021, compared to 48 percent who intend to buy Bitcoin.
Ethereum Price Prediction
Ethereum has cultivated an enthusiastic community of supporters who eagerly speculate on future price trajectories, similar to Bitcoin. Optimistic Ethereum fans boldly proclaim untold growth, while critics adopt a more pessimistic stance.
After Ethereum’s robust performance in the first half of 2021, significantly outpacing Bitcoin in gains and activity, some analysts predicted that ETH could surpass BTC in valuation by year’s end.
Looking ahead, expert projections for Ethereum in 2023 range between $2,100 (potential high) to $1,100 (potential low) based on yPredicts’ panel of Ethereum price forecast, with the consensus settling around $1,871 (maximum price) by December 2023.
Meanwhile, other industry experts envision Ethereum approaching $3,600 sometime next year. The future price remains uncertain, but Ethereum continues to garner excitement and high hopes from investors.
Investors and traders can read this comprehensive article on Ethereum price prediction to check the future price of ether from the year 2023 to 2033.
Development of Major Technologies Plays an Important Role
Major technology developments related to Ethereum can also affect its price.
- Upgrades to Ethereum’s core protocol that improve functionality and scalability positively impact price.
- Setbacks in planned upgrades or security breaches can diminish confidence and depress prices.
- Ethereum prices jumped 10% in 2021 ahead of the London hard fork network upgrade.
Factors influencing ether’s price include the progress of ambitious upgrades like Ethereum 2.0 that promises to transform Ethereum’s underlying technology.
Economic Conditions of the Crypto Market
The overall economic environment has a significant influence on Ethereum’s price.
- Strong economic growth and a bullish stock market create a positive sentiment that lifts cryptocurrency prices.
- Recessionary conditions and bear markets put downward pressure on speculative assets like Ethereum.
- Cryptocurrencies saw a robust correlational relationship with the S&P 500 during the 2020 economic downturn.
Factors affecting the cryptocurrency price trends align closely with macroeconomic developments.
Changes in ETH-USD Price
The dynamics around cryptocurrency exchanges where Ethereum is traded is another factor.
- High trading volumes and new Ethereum pairings on exchanges signal growing legitimacy and lift prices.
- Major exchanges’ downtime due to hacking or system failures can depress prices.
- Crypto exchange downtimes have resulted in double-digit price drops for cryptocurrencies like Ethereum in the past.
- Listing Ethereum on major exchanges gives investors, and traders access to the upside. It means that many individuals can buy, sell and consume Ethereum faster. Increased availability can attract more users, including traders and institutional investors, resulting in higher trading volumes. Higher trade volumes and exchange rates can cause inflation.
- Many participants actively trading Ethereum on exchanges are equivalent to buying and selling orders, which reduces the possibility of large price swings and increases market stability, aka price predictions, because it provides a more reliable basis for predicting future price movements.
- Additionally, Ethereum’s presence on reputable exchanges gives it strong credibility and legitimacy in the eyes of investors. Listing on well-known forums adds credibility to the cryptocurrency, potentially attracting more investors to participate in Ethereum trading.
Factors influencing cryptocurrency prices include accessibility and reliability of exchanges for regular trading activity.
Whale Manipulation
Wealthy investors or ‘whales’ can manipulate Ethereum’s price through practices like wash trading.
- It can create artificial hype and price hikes in the short term that eventually correct.
- Groups of whales working in tandem can coordinate pump and dump schemes.
- One thousand whales control 40% of Ethereum’s supply, giving them the power to move markets.
Geopolitical Tensions Indirectly Affect Cryptocurrency Price
Major geopolitical tensions that capture public attention and sentiment can indirectly sway Ethereum’s price.
- Geopolitical tensions like trade wars, military conflicts, etc., lead to financial market uncertainty that depresses crypto prices.
- Other events like global pandemics also weaken the economic outlook and indirectly lower prices.
- The onset of the Russia-Ukraine war preceded a significant downturn across cryptocurrency markets, with Ethereum losing over 37% value in 2022.
| Related Reading Ethereum Price Prediction 2023-2033 |
Bottom Line
Ethereum’s price is subject to influence from a diverse range of factors. This empirical study “Top 10 Factors Affecting the Ethereum Price” has examined the top 10 factors that affect Ethereum price and cryptocurrency adoption. Supply and demand, investors’ sentiments, price fluctuations of the other cryptocurrencies, and broader economic trends significantly are the top factors that affect Ethereum’s price. Investors should closely monitor these key factors to understand the forces shaping Ethereum’s volatile price movements. The onus is also on regulators to craft policies enabling innovation while protecting investors.
To make informed decisions regarding investing or utilizing Ethereum, it is vital to examine key aspects of its background including its history, use cases, technological strengths compared to alternatives, and challenges it still needs to resolve. A lot of people who use Ethereum do so because they are looking at the future potential of Ethereum. Doing so provides the necessary perspective for individuals to determine if Ethereum aligns with their financial objectives or technological needs. The platform’s past, present use cases, and future evolution shape its investment outlook and utility.
