What is ETH/USD?
The ETH/USD currency pair indicates the number of US dollars required to purchase one Ether (ETH). ETH is the native token of Ethereum, a decentralised, open-source blockchain platform for computing.
Released in 2015, Ethereum was the most significant advancement in blockchain technology since the launch of Bitcoin. It introduced several ground-breaking concepts, such as smart contracts, decentralised applications, and non-fungible tokens (NFTs), which have revolutionised how blockchain technology is used.
Smart contracts automate complex legal processes and facilitate decentralised applications. They have paved the way for the growth of Decentralised Finance (DeFi), offering peer-to-peer financial services and allowing individuals to collaborate, invest, borrow, and generate passive income without traditional intermediaries like banks or brokers.
The influence of Ethereum extends beyond Ether. It has its own standard called ERC20 for creating new tokens. Many of today's prominent cryptocurrencies started as ERC20 tokens before migrating to their own independent networks (mainnets).
As the Ethereum network gained popularity, the cost of transactions (Gas), particularly during bull runs, rose to prohibitive levels. This led to the emergence of several competitors, including Cardano (ADA) and Solana (SOL).
ETH/USD historical performance
ETH’s historically volatile performance began in 2015 with a low of less than $1. It climbed to a peak of $1,400 in January 2018, then fell sharply. In 2021, it reached a high of $4,362.35, but retraced below $1,000 in 2022.
Having a circulating supply exceeding 120 million, Ether is the altcoin with the greatest market cap by far, with its market dominance reaching close to one fifth of the total cryptocurrency market.
What affects the price of ETH/USD?
Like any other cryptocurrency or financial asset, there are a variety of fundamental and speculative factors that affect the price of ETH/USD. While the Bitcoin and Ethereum networks have different objectives and their native currencies BTC and ETH are not competitors, the direction of the price of bitcoin, the largest cryptocurrency by market capitalization, has a direct impact on the price of Ether and all other cryptocurrencies. In addition to the price of BTC, the price of ETH relative to the U.S. dollar is influenced by the following factors:
Positive news or endorsements from influential figures can raise market sentiment, while adoption, user activity, and the number of ETH tokens in circulation affect demand and supply.
Adoption and use cases also play a role in determining Ethereum's value. Demand can be fuelled by high-profile projects or corporations selecting Ethereum for blockchain solutions. Upgrades to a network's performance, scalability, and security can influence investor confidence and price.
Other blockchain platforms, such as Binance Smart Chain, Cardano, and Solana, can also affect the price of Ethereum. Regulation and legal developments can have a substantial effect on the prices of cryptocurrencies, with regulatory clarity and acceptance bolstering investor confidence and crackdowns or restrictions causing uncertainty and sell-offs.
Global economic factors, such as inflation, financial crises, and currency devaluation, can influence investors to seek out alternative assets, such as cryptocurrencies, thereby increasing demand and prices. Large holders of Ether, referred to as "whales," can influence the market by engaging in substantial transactions that result in price fluctuations.
The cryptocurrency market is dominated by speculation, with traders and investors making decisions based on short-term price forecasts, technical analysis, and market trends, which can result in rapid price fluctuations.
What to watch out for when trading ETH/USD?
Traders must closely monitor data releases and statements from organisations that can impact regulatory policies, market sentiment, and the cryptocurrency market as a whole when trading ETH/USD. These consist of:
- The Ethereum Foundation is a key player in the development and enhancement of the Ethereum blockchain, with announcements regarding network upgrades, improvements, and changes in the roadmap affecting the price of ETH.
- Vitalik Buterin, the co-founder, is also a significant influencer, with his social media activity and interviews shedding light on the future of Ethereum.
- Decentralized Finance (DeFi) projects built on the Ethereum platform are major drivers of demand for ETH, with news and developments related to popular protocols like MakerDAO, Aave, Compound, and Uniswap impacting ETH's price.
- Initial Coin Offerings (ICOs) and token sales can also affect ETH's price, especially if the projects gain significant attention and participation.
- Enterprise adoption of Ethereum for blockchain solutions can boost confidence in the platform and drive demand for ETH.
- Regulatory developments can influence investor sentiment and the price of ETH.
- Listings on major exchanges can increase liquidity and trading volume, which could affect ETH's price.