ethereum
Analysis

What is driving the price of Ethereum

So far in 2020, the price of Ethereum has been boosted in an important way. But what is the cause of this? In this article. we explain.

Ethereum’s behaviour and price this year has made the crypto community have high expectations in the cryptocurrency. Although 2019 was a particularly bad year for ETH, everything seems to indicate that this new decade the digital currency will have better returns.

But what changed for Ethereum to recover from his bad streak? Well, in this article we will present some of the reasons that will possibly make this 2020 the “year of ETH”.

Ethereum: from the fateful 2019 to the great 2020

Ethereum’s path began to crumble in the second half of 2019, when it had a significant drop in its prices. It went from being worth $348 to $198 in a matter of 20 days, according to CoinMarketCap data.

This not only caused fear among investors but was another reason for distrust that had already been accumulating for a few months. And this lack of confidence in the cryptocurrency was due to the continuous postponements of the Ethereum update, ETH 2.0.

Ethereum had been presenting scalability issues for some time, which various investors claimed from developers. The latter said that ETH 2.0 would be the solution to these problems. However, the update repeatedly failed to meet the deadlines. This only increased uncertainty in investors. In fact, some decided to stop betting on cryptocurrency.

The consequences of this were noted during the remainder of 2019. In fact, according to CoinMarketCap, on December 25, ETH hit bottom reaching $125.

But the promises of better performance this new year paid off. Already by the end of 2019, several analysts made predictions that this beginning of the decade was going to be quite beneficial for the cryptocurrency. They based their argument on the different plans that were planned for it, including ETH 2.0.

The promise that will finally be fulfilled

Expectations of what DeFi and ETH 2.0 could offer for the cryptocurrency made Ethereum start 2020 with a bullish rally. This increase in its price increased the optimistic feeling around the digital currency.

But, it was not until February 5, 2020 that the first great indications for an excellent year were shown. This day, one of Ethereum 2.0 researchers, Justin Drake, said the update would be done this year: “I have a 95 percent confidence that we will release in 2020.”

Following Drake’s comments, the cryptocurrency bullish rally accelerated, reaching its peak this year of $281 on February 19.

According to Sharan Nair, commercial director of CRUXPay and CoinSwitch.co, “investors probably accepted the promise of ETH 2.0, which is said to scale the Ethereum blockchain significantly.”

At the time of writing, the price of Ethereum was $226, which represents a fall. However, most experts believe that this will be somewhat momentary due to the great year that the cryptocurrency has ahead.

DeFi’s role

For their part, Decentralized Finance, or DeFi, has also played an important role in the price of cryptocurrency. In 2019, the DeFi exploded, increasing from 320 million dollars to 670 million dollars.

According to Nair, many investors took this as a possible threat to their business.

“The numbers tell us that investors see that DeFi is really harmful and believe that it can replace traditional finance, which leads to a greater accumulation of Ether.”

In addition, it is important to note that MakerDAO, the largest DeFi project, and most of the other protocols are based on the Ethereum blockchain. Therefore, the demand for ETH may be increasing with the growth of DeFi.

For all these reasons, it is believed that the price of Ethereum has been boosted so far in 2020. And most likely it will continue that way in the short term.

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