what affects the price of ether

Factors behind the price of Ether

With the prices of cryptocurrencies regularly hitting new all-time highs (especially Bitcoin), one can’t help but wonder, where is this value coming from? While Bitcoin (BTC) may grab most of the headlines, there is also a rising star in the market that deserves our attention: Ethereum (ETH).

At the time of writing, the price of ethereum is just over the $1,300 mark, and it’s time to explore the reasons behind it.

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Factors that determine cryptocurrency prices

Before discussing the price influencers of ETH and the value of Ethereum, let’s take a look at the general factors that influence the price of cryptocurrencies.

Supply and demand

Let’s start with a simple factor. The Law of Supply and Demand is a long-standing economic theory that explains the relationship between buyers and sellers of a certain resource.

Simply put, if the supply of a cryptocurrency is low and the demand is high, the price may rise. Conversely, if demand is low and supply is high, prices may fall.

Regulation and Regulation

Authorities around the world have different views on cryptocurrencies, which could affect their prices. If these views are somewhat restrictive, the price may fall. However, it also applies to the other side of the problem. If authorities are optimistic about the outlook, this could be a strong catalyst for higher prices.

Economic status

Cryptocurrencies like Bitcoin have the potential to be a store of value for assets in difficult economic times. If the economy starts to collapse, people may turn to other assets in hopes of preserving their wealth. That said, the strength of the global economy may play a major role in the price determination of cryptocurrencies.

Media power

The media is a powerful tool that can help or hurt cryptocurrencies. To some extent, the media can control investor sentiment. If the media paints a positive image of cryptocurrencies, it may attract new investors to join. On the other hand, if cryptocurrencies are portrayed negatively in the media, even hard-hearted investors may be scared off.

From the perspective of knowledge introduction, the media also affects the price. By imparting knowledge about cryptocurrencies without prejudice, the media also affects traders in two ways. It is also important to note that when the price of Bitcoin is trending upwards, the prices of other cryptocurrencies tend to be positively affected.

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Factors that determine the price of ether

In reality, ether is not quite like other cryptocurrencies. Because it is a user-backed product built on a ledger system, everyone can see the full history of transactions, creating ongoing transparency. As the network and supporters grow, new price-changing factors begin to emerge.

Hard fork

Let’s briefly review an Ethereum hard fork, which is essentially an update that brings new technical capabilities to a particular blockchain. This update separates the new blockchain from the old one, essentially creating an entirely new cryptocurrency.

Everyone who provides processing power to any network must agree to 100% abide by their protocol to ensure everything works properly. As groups continue to grow, people may disagree on how to manage the network. Therefore, people may refuse to update their systems and stay on the old blockchain. While many users of the old protocol will likely fade away over time, a hard fork has the potential to bring volatility. Let’s say there’s an update that allows miners to charge more for processing blocks. This update may bring inflation and ultimately lead to price drops.

With Ethereum’s recent shift from a proof-of-work system to a proof-of-stake system, users may have to wait and see how it performs to gain a clearer picture of ETH’s future.

Speculation

Like all other cryptocurrencies, Ethereum does not depend on any central bank. This means that price volatility may be subject to speculation by traders.

In addition, the speculative behavior of traders also brings new influence factors. For example, since there is no cap on the supply of ETH, one might also consider the risk of inflation and user interest.

However, since Ether is directly tied to the Ethereum platform, its usefulness is assured. It allows people to use unique features like decentralized applications and smart contracts.

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Ethereum Outlook

We understand that these factors may be complex, there may be some we have not mentioned, and some other factors may have been overlooked by us. But the above are the most definite factors, and therefore should not be ignored.

As for the future of ether and where its price goes, we can only wait and see.

If you want to buy ether or sell your ether, Paxful makes it easy.

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