Ethereum Breaks Another All-Time High

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On Friday, October 29th Ethereum broke its all-time high, previously set at $4,379.62. The digital asset peaked at $4,459.20, and at the time of writing is trading within a steep upward channel. October has been a great month for Ethereum, with an approximately 46% price increase. 

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A major tailwind for Ethereum’s price pressure continues to be the EIP-1559 upgrade, which projects to make Ethereum’s coin issuance deflationary. Since the deployment of EIP-1559 on August 5th, 2.46b billion worth of Eth has been burned. Currently, Ethereum’s net emission rate is about -950 coins per day. Therefore, as of the present day, Ethereum’s coin issuance is deflationary. 

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Source: theblockcrypto

Anticipation for the Eth 2.0 upgrade is the other major tailwind for Ethereum’s recent price increase. This upgrade will bring major improvements to the Ethereum network. Most importantly, shard-chains along with a shift to a proof-of-stake consensus mechanism will alter Ethereum’s base level protocol to improve network scalability and efficiency.  

The bullish case for Ethereum is that 2.0 upgrades along with a deflationary coin issuance rate will work together to cause a drastic increase in Ethereum’s price per coin. For the past year, the anticipation of these improvements has caused investors to take Ethereum off exchanges. When this Ethereum transfers out of exchange wallets, it either goes: 

  1. Into cold storage 
  2. Into Ethereum apps 
  3. Onto another blockchain 
  4. Onto a layer 2 Ethereum scaling solution (such as Polygon or Arbitrum). 

Unlike Bitcoin, which is currently only used for one utility (as a storage of value), Ethereum maintains multiple use-cases. Due to this, there are numerous incentives within the Ethereum network that can create upward price pressure for Ethereum’s coin price. 

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Source: Bankless, “Ether: The Triple Point Asset

Market Analysis

Compared to Bitcoin, which has identified halving cycles, Ethereum is trading in unknown territory. While Bitcoin is the first-ever rendition of digital money, Ethereum is the first-ever smart contract blockchain. Both are nascent digital assets with majorly strong network effects. Provided nothing major goes wrong, these technologies are likely to stay functional for decades to come. 

There are a couple overarching reasons why Ethereum keeps hitting all-time highs:

  1. Ethereum is attracting a global market of new users.
  2. Ethereum has a specifically strong network effect. 
  3. Ethereum trades at a monetary premium

Ethereum and Bitcoin represent the first-ever virtual and self-reliant monetary networks. Although the idea of decentralization isn’t new, the idea of decentralized money is new. The effect that digitally self-sovereign money has on society is now unknown. This, combined with the fact that these digital assets tend to move exponentially, makes it complicated to predict price potential. This is especially true for Ethereum, which has only existed since 2014. 

Overall, things are currently looking healthy and green in the Ethereum market. Tailwinds in the form of economic incentives and technological utility are creating demand and continuing to push the price forward. Whether this growth is sustainable over the long term is unknown. However, on-chain data can provide support for the recent price movements.

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