What is Ethereum and why does its price keep rising?

If you’re new to cryptocurrency, you must’ve heard about Bitcoin. But did you know that there’s another popular one that, unlike Bitcoin, isn’t meant to be digital gold? The Ethereum network is a giant computer that runs programs and applications. This unique functionality has made it incredibly popular since its inception and positioned the coin at a solid number two.

Understanding Ethereum and why its price keeps climbing is essential for making better financial decisions. Let’s break down everything you need to know about this digital asset.

What is Ethereum exactly?

Think of Ethereum like a digital computer network that enables the new internet, where not only can you view and create content, but also own it and other digital assets—this concept is known as Web 3.0.

The innovative concept that Ethereum introduced in the past is called “smart contracts”. These are like digital agreements that execute when certain conditions are met. The big difference? Once the conditions are set, they can’t be altered, and the execution is automatic, making any third-party involvement obsolete. For example, if you wanted to rent an apartment, a smart contract could automatically transfer the keys to you once you pay the rent, without any action needed from a landlord or property manager.

The currency part of Ethereum is the token called Ether (ETH), which is used for any interaction you have with the Ethereum network as gas fees, whether it’s sending or swapping tokens and many more. This essential aspect motivates the participants to keep the network secure at all times.

How is Ethereum different from Bitcoin?

While both Bitcoin and Ethereum are cryptocurrencies, they serve different purposes. Bitcoin was created to be a decentralized digital cash that can be transferred from one user to another without a third party’s permission. Ethereum focuses on functionality and building the future of the Internet. If Bitcoin is digital gold, then Ethereum has to be digital oil, running the entire digital economy.

Another difference is that Bitcoin processes 7 transactions per second, while Ethereum can handle 15. Bitcoin also has a limited supply of 21 million coins, whereas Ethereum doesn’t have a hard cap. However, recent updates to Ethereum have made it so that some Ether gets “burned” or destroyed with each transaction, which can help control the supply.

Why does Ethereum’s price keep rising?

The price growth can be attributed to several factors, with the demand from users and businesses, driven by the factors listed below, being the primary one.

DeFi

The major driver is the growth of decentralized finance (DeFi). This category includes financial on-chain applications meant for trading and swapping tokens as well as lending and borrowing money. Each app can be used without a bank account or any other traditional financial system institution, making them decentralized and allowing for use anywhere in the world. Each transaction requires gas fees paid in ETH, thus increasing demand.

NFTs

Another factor is the rise of NFTs (non-fungible tokens). Despite not being as popular as before, many NFTs are created and traded on the Ethereum network, requiring ETH for transactions. NFTs becoming popular again could be a great catalyst for a rise in demand for Ether.

Factors that affect Ethereum price

There are multiple factors that can either negatively or positively impact the price of Ethereum. It’s always worth learning about them to spot the tailwinds or headwinds early on.

Network usage

High network usage can indicate that there’s demand for Ethereum and the entire ecosystem is growing, which can cause the price to gradually increase or spike randomly.

Market sentiment

The market sentiment is very important when discussing the Ethereum price. Bullish sentiment can help push the price higher, while bearish sentiment makes the price prone to sudden spikes.

Regulatory news

Is Ethereum facing regulatory scrutiny, or is it being pushed by the government? The circumstances contribute to uncertainty around the project or mainstream adoption.

Competition

If the competition is low, Ethereum thrives. On the contrary, if many similar projects are being created and backed by VCs, this can dilute Ethereum’s market share, thus negatively impacting the price as the market is expecting minimal user growth.

How to track Ethereum price

Keeping track of Ethereum’s price is crucial if you’re interested in buying or investing. Its price changes constantly throughout the day, just like stock prices, but with much higher volatility.

Swapped.com provides real-time price information, charts, and market statistics. These resources can help you identify the current trend and make informed, purely data-driven decisions about when to buy and when to sell.

When you’re ready to check the Ethereum price or purchase ETH, hop onto the Swapped.com website for competitive rates and a user-friendly interface designed for beginners, guiding you every step of the way.