While the value of Bitcoin continues to hit record highs and its market capitalization is nearing $200 billion, the Bitcoin community and its critics are still debating the prospect of the world’s first and foremost digital currency being used as a medium of exchange on a mass scale in the near future. But, according to one industry analyst, investors are ignoring the elephant in the room: Ethereum.
The price of Ethereum has continued to rise after the network secured the backing of a Russian bank and one of the largest energy companies in the world. The price of Ethereum also has been helped by a handful of positive developments in the ethereum ecosystem, including the first implementation of the Raiden Network on the main ethereum blockchain.
Investment firm Ark Invest has cited three reasons why the price of Ethereum has peaked. The company cited increased institutional interest, strong signals on the channel and an upcoming protocol update as the main reasons.
Why Ethereum is growing
ARK Investment Management, also known as Ark Invest, released a research note last week explaining three main reasons why Ethereum is hitting new all-time highs.
The first reason cited by the company’s analyst is increased institutional interest. Ark Invest noted that Canada has launched a number of exchange-traded funds (ETFs) for Etherium, making it easier for institutional investors to access the ETH price. A footnote adds:
Institutions and companies such as the European Investment Bank and Visa have confirmed the viability of the Ethereum blockchain and announced its use for issuance and settlement respectively.
In late April, the European Investment Bank (EIB), a non-profit organization and lender to the European Union, announced a new type of digital bond created using Ethereum. Meanwhile, payment giant Visa announced in late March the first transactions settled by Visa in USD Coin (USDC) and processed on the Ethereum blockchain.
Ethereum price chart. Source: markets.Bitcoin.com
On Sunday evening, the price of ETH reached a new all-time high. According to markets.Bitcoin.com, it currently stands at $4,116.
The second reason mentioned by the analyst is the presence of strong signals in the chain. The company stated: The use of Ethereum is increasing and in some areas surpassing the use of bitcoin, as evidenced by the number of active wallets and total transaction fees :
In our opinion, Ethereum’s recent breakthrough is due to decentralized funding (Defi) and non-pledge tokens (NFT), which are growing rapidly.
The third reason is related to the upcoming protocol update. A note indicates that the Ethereum 1559 enhancement proposal, expected in July, will significantly change Ethereum’s transaction cost model, and provides details:
In an attempt to reduce the volatility of Ethereum fees, EIP-1559 introduces a mechanism to burn some transaction fees, which hurts the outstanding supply and introduces deflation into the Ethereum ecosystem. The effect on the price of Ether could be the same as if Bitcoin were split in two.
What do you think of Ark Invest’s explanation of why Ether has risen to historic heights? Let us know your comments in the section below.
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