Ethereum is the platform upon which a cryptocurrency (“crypto”) called Ether (ETH) is built. Ether is the world’s largest altcoin (cryptocurrencies other than Bitcoin) by market value. It was launched in 2015. As of mid-January 2021, it was trading at over $1,100 per unit, which is near the all-time high for this crypto.
So many investors are buying up ETH, in fact, that reserves have dropped on many Ethereum exchange sites. This mirrors a similar situation with Bitcoin in 2017. The low levels of available ETH may have a dramatic positive impact on the price of the crypto. Read on to learn more about the potential for the price of ETH to rise sharply due to low levels of availability.
Ethereum Reserves Have Been Dropping
Ethereum reserves began dropping significantly in mid-January. The overall reserves of ETH declined over 10% from January 14th to January 16th. This drop in reserves came as the price and market capitalization of ETH neared all-time highs. The number of Google searches referencing ETH also hit an all-time high during this period, with many analysts remarking upon this never-before-seen phenomenon. ETH reserves hit a 19-month low during this period.
The Launch of ETH 2.0 Increases Demand
One of the factors in ETH’s high demand is the launch of ETH 2.0. The launch of ETH 2.0 is a major upgrade intended to dramatically increase the transaction throughput of ETH from around 15 transactions per second to tens of thousands of transactions per second. The launch is being carried out in three phases. “Phase 0” was launched on December 1, 2020. It was centered around the introduction of the Beacon Chain, which is new proof-of-stake blockchain. “Phase 1” and “Phase 2” have not yet been launched. Phase 1 will center around the introduction of shard chains to the Beacon Chain, while Phase 2 will implement state execution in the shard chains.
Bitcoin Underwent a Similar Situation In 2017
Bitcoin underwent a similar supply shortage in 2017. This lead to the price of Bitcoin quadrupling over 90 days as the demand continued. Most analysts expect ETH’s price to rise due to the shortage, just as Bitcoin’s did. However, ETH may not behave in exactly the same way as Bitcoin did, despite similar situations.
The Low Ethereum Reserves May Lead to a Price Increase
While ETH is expected to rise in relation to the supply shortage, it may not rise right away. ETH may experience a steep short-term drop if the shortage becomes more severe. However, it is expected to rise shortly thereafter. ETH’s rise in price may be temporary, as an increase in supply will likely lead to stabilization.
Ethereum Has Risen Sharply In the Last Year
Expectations of ETH’s price increase come as the crypto has risen by more than 800% over the past year. This rapid rise has led to doubt among some investors that the price of ETH could continue to rise. However, the crypto’s OI and trade volume indicate that it could reach a new short-time high in the near future.