In April 2020, ethereum was wallowing in the receding ripples of a three-year market downturn. Having reached a peak of nearly $1,200 in early 2018, the cryptocurrency was dragged down to below $100 as the rising market wave crashed in spectacular style.
But over the last 12 months, the tide has well and truly turned. Buffeted by a buoyant market and a resurgent bitcoin, ethereum has risen beyond its previous peak to hit a series of all-time highs in 2021.
On Thursday, a new record was broken as ethereum reached $2,797 – representing a 1,300 per cent price increase since this time last year. One analyst claimed this week that “a ride to $5,000 is imminent”.
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The latest gains are even more impressive when compared with those of bitcoin. The world’s first cryptocurrency has seen its own record highs in 2021, but they have been dwarfed – in percentage terms at least – by those seen by its less famous cousin.
Ethereum has outperformed bitcoin by a factor of three-to-one, and now has a market cap roughly one third its size. In April 2021, ethereum’s overall value was just over one tenth of bitcoin’s.
And while ethereum is cresting, bitcoin is experiencing a relatively severe slump, having lost nearly a quarter of its value since achieving a new record high earlier this month.
So what’s brought about this change in fortunes? One reason often cited by by crypto experts is ethereum’s underlying technology, which allows it to be of far greater utility in the emerging industry of decentralised finance (DeFi).
Ethereum was created in 2013 in order to use the blockchain – the revolutionary online ledger system introduced and popularised by bitcoin – in an entirely new way.
While bitcoin uses the blockchain to support payments and act as a store of value, ethereum was designed to act as a software platform that can enable smart contracts for any asset or application without need for a third party.
While bitcoin offers to decentralise finance, ethereum offers to decentralise the entire internet.
This near-limitless potential has led some experts to suggest that ethereum could even one day surpass bitcoin in terms of overall value.
This week, its market cap has already overtaken one online payments giant in the form of PayPal.
“Ethereum has the possibility to overtake the market capitalisation, and thus value, of bitcoin,” Hubert Olszewski, director of business development at Blockchain Board of Derivatives, told The Independent in 2018, back when ethereum was just a tiny fraction of bitcoin’s market value.
“This is because, from the get-go, it was a more versatile tool.”
In the three years since, ethereum has continued to see major upgrades that improve its utility even further. The arrival of NFTs (non-fungible tokens) to the mainstream is one such example of ethereum floating free of bitcoin’s considerable wake.
Some market analysts suggest these advances could see ethereum ultimately “decouple” from bitcoin.
“While the two have traded in tandem for much of the last three years, as the cryptocurrency market starts to mature, investors will be looking across the broader spectrum of assets and assessing which has the best long-term potential,” Simon Peters, a senior analyst at the online trading platform eToro, told The Independent.
“Bitcoin has captured the attention of millions of investors, but ethereum offers an alternative. With ether’s dollar valuation significantly lower than bitcoin, it also appeals to investors who want to own whole coins, something which is now far more expensive to achieve with bitcoin.
“With the widespread usage of ethereum‘s network following its latest upgrades, the cryptocurrency continues to offer a lot of opportunities to developers and investors.”