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The 3 factors behind the Ethereum rally
The most obvious factor behind the upsurge of Ethereum is that it has been oversold in the latter half of 2019. Ethereum dropped to as low as $115 in December 2019, leaving ETH down by around 91 percent from its record high.
As the cryptocurrency market generally started to rebound in anticipation of the bitcoin block reward halving in April, the Ethereum price started to pick up momentum. The oversold nature of ETH combined with the highly anticipated release of Ethereum 2.0 and the rapid growth of the decentralized finance (DeFi) market.
DeFi is crucial for the mainstream adoption of Ethereum because it utilizes ETH as the main collateral. On DeFi platforms like BlockFi, users can issue loans, process payments, and virtually carry out all tasks a traditional financial institution can in a decentralized setting.
ETH 2.0 supplements DeFi as it increases the overall efficiency of the Ethereum blockchain network through various technologies like second-layer scaling solutions and proof-of-stake (PoS).
Over $1 billion worth of ETH is now used as collateral on DeFi platforms, which indicates actual significant real-world usage of Ethereum.
In previous bull cycles, there was criticism that Ethereum and decentralized applications (DApps) on top of it lack actual users and user activity.
Ethereum co-founder Vitalik Buterin said in December 2017:
“So total cryptocoin market cap just hit $0.5T today. But have we earned it? How many unbanked people have we banked? How much censorship-resistant commerce for the common people have we enabled? How many dapps have we created that have substantial usage? Low added value per user for using a blockchain is fine, but then you have to make up for it in volume.”
Since then, the entire cryptocurrency market has improved in terms of infrastructure, user activity, and mainstream adoption.
The high expectations of faster growth in the DeFi market put together with the imminent release of scalability solutions are the two major fundamental factors backing the recent upsurge.
Seeing venture capital interest
On Feb. 13, Bloomberg reported that crypto lending platform BlockFi raised $30 million from a team of financial backing companies consisting of one sustained by billionaire Peter Thiel. The quick growth of the financing market is beginning to amass the passion of leading financial backing companies as well as therefore the mainstream, which is a favorable variable of development for Ethereum in the tool to lasting.
Published In: Ethereum, Evaluation
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Joseph Youthful is a financing as well as technology reporter. He has actually dealt with leading media as well as information companies in the modern technology as well as money markets, using unique material, meetings, understandings as well as evaluation of cryptocurrencies, cutting-edge as well as advanced innovations.
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