Ethereum, the world’s second largest cryptocurrency behind Bitcoin, is continuing to enjoy a strong month.
It hit an all-time high of over $4,820 (£3,570) on Tuesday, though has since slipped back slightly, to around $4,750 (£2,520).
Ethereum has grown steadily since late July, following the crash after May’s peak.
But what is behind its rise, and what do experts predict could happen in the future? Here is what you need to know.
Why has Ethereum been climbing?
Sam Kopelman, UK manager of cryptocurrency exchange and wallet Luno, told i that Ethereum is keeping pace with Bitcoin’s gains.
“It’s been a good start to the week for the crypto markets, with Bitcoin and Ether both climbing to new all-time-highs on Tuesday morning,” he said.
“Bitcoin’s move comes after a consolidation period of 17 days within the $58,000 to $64,000 range. Hot on the heels of Bitcoin, Ether has risen 8 per cent over the last seven days – now increasing at the same rate as Bitcoin.”
One reason for the rising prices is increased interest in decentralised finance, or DeFi.
This is a new trend which aims to create financial applications like lending and trading on the blockchain.
There is also a lot of interest in non-fungible tokens (NFTs) – digital media and assets which are largely built on Ethereum’s network.
There is also a lot of media focus on cryptocurrencies right now. This tends to lead to increased investment, and therefore rising prices.
The crypto market as a whole has also been buoyed by the launch of the first US Bitcoin futures-based exchange-traded fund (ETF), which opened last month.
Simply put, an ETF allows people to invest in something without having to actually purchase it, much like buying shares in a company.
As Investopedia explains: “An exchange-traded fund (ETF) is a type of security that tracks an index, sector, commodity, or other asset, but which can be purchased or sold on a stock exchange the same way a regular stock can. An ETF can be structured to track anything from the price of an individual commodity to a large and diverse collection of securities.”
They allow people to purchase a slice of a diversified portfolio, rather than a single asset.
They also open up the market to far more, and potentially far larger investors, who may have been unwilling to purchase coins through crypto exchanges, which can sometimes be complicated and are seen as more risky. The ETF allows investors to make Bitcoin in a more traditional manner.
Matt Senter, chief technology officer for Bitcoin rewards app Lolli, told The Independent: “A Bitcoin ETF will provide even more exposure to Bitcoin for those who are perhaps wary of buying it directly from an exchange.
“By allowing individuals to invest in Bitcoin through ETFs that track its underlying value, investors can become familiar with Bitcoin while fielding aspects of the ownership experience that may be daunting to crypto novices, such as navigating exchanges, wallets and private keys.”
When Bitcoin rises, other cryptocurrencies tend to rise too.
Ethereum price prediction
Some experts believe Ethereum has a chance to one day surpass Bitcoin and become the world’s premier cryptocurrency.
Rahul Rai, the co-head of market neutral at BlockTower Capital, told Insider: “I definitely think there’s a really good chance for Ether to surpass Bitcoin. I wouldn’t be surprised if it happened within the cycle.
“Very tough to predict when this cycle will end. My take is mid-next year.”
Regarding Ethereum’s link to DeFi and NFTs, Mr Rai said: “Ethereum is trying to power the rails of all of global finance in the future, and that is a much bigger market, if it does succeed.
“If it does succeed, and if the thesis plays out, then the market value is going to capture trillions of dollars in global activity.”
Should I invest in cryptocurrency?
People invest at their own risk and cryptocurrencies are not regulated by British financial authorities.
All crypto investments are risky, but meme coins like Shiba Inu are particularly volatile, and you should be prepared to lose everything you invest.
The Financial Conduct Authority (FCA) warned in January: “Investing in cryptoassets, or investments and lending linked to them, generally involves taking very high risks with investors’ money.
“If consumers invest in these types of product, they should be prepared to lose all their money.”
Susannah Streeter, senior investment and markets analyst, Hargreaves Lansdown previously explained the risks to i.
She said: “On top of being extremely volatile, most cryptocurrencies are unregulated, which not only adds another layer of uncertainty but also means that investors have little or no protection against fraud.”