The recent Ethereum bull run has caused quite a stir in the crypto space. Although the continuation of the 2020 Bitcoin bull run is still in full swing, eyes are turning to Ethereum as it approaches its previous all-time high. Some Ethereum predictions even suggest that we could see an Ethereum bull run in 2021 perform in a similar way to Bitcoin's atmospheric rise during late 2017. Many believe that it is only a matter of time before Ethereum embarks on a similarly explosive bull run. Moreover, as the roll-out of Ethereum 2.0 progresses, Ethereum’s infrastructure fundamentals are improving substantially.
In this article, we’re going to look at what is driving the recent price action of Ethereum. Also, we’re going to discuss the future of the Ethereum network, as well as go through some common Ethereum predictions for 2021.
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As you might know, Bitcoin was the very first cryptocurrency - essentially a digital currency powered by blockchain, a form of distributed ledger technology. With the release of Bitcoin, it was for the first time possible to mathematically verify and send transactions across the world, without the need for intermediaries. As such, Bitcoin is a revolutionary type of currency. However, it does have its limits.
Put simply, the Bitcoin blockchain is designed to send transactions from wallet A to wallet B. Back in 2013, a 19-year-old programmer named Vitalik Buterin, who was the editor of Bitcoin Magazine at the time, recognized these limitations. He approached the Bitcoin team and requested to build an application on top of the Bitcoin blockchain. Laughed at and rejected by the Bitcoin team, Buterin decided to take matters into his own hands.
Ethereum finally had its main launch in mid-2015, just months after Buterin’s 21st birthday. The introduction of the Ethereum blockchain created a plethora of opportunities for developers to build decentralized applications, hosted and run through the Ethereum blockchain.
Smart contracts had been a concept for nearly 30 years before Buterin finally made them a reality. Ethereum allows developers to program money, to be able to specify an amount of funds to move to certain addresses upon certain conditions being met. Furthermore, this is all achieved in a completely decentralized manner.
The advent of Ethereum-powered Decentralized Finance (DeFi) applications present an opportunity to make transparent, financial tools and instruments available to anybody with internet access. The decentralized nature of DeFi means there is no single-point-of-failure, nor manipulation or inflation from a centralized governing body.
More than half of the global population currently doesn’t have access to banking services. This is for a variety of reasons - from not having sufficient identification paperwork to restrictive economic conditions. Yet, out of this group of people, the majority have a smartphone with internet access. The emergence of DeFi projects could already feel like a natural progression of financial services in Western societies, with minimal changes to their everyday habits. For populations in developing countries, however, DeFi is life-changing.
DeFi is only a reality thanks to underlying technologies like Ethereum, which plays host to more than 200 DeFi applications at the time of writing. Each application created on top of Ethereum will need to use the ETH token in one way or another. Consequently, one of the key Ethereum predictions for 2021 is that the DeFi and dApp sector will continue to grow. Furthermore, users of these applications will also need to use ETH to pay for gas. If you’re unsure how this works, make sure to save our Ethereum Gas Explained article for later!
Bitcoin’s price performance in 2020 got many people talking. However, Ethereum actually outperformed Bitcoin by around 44% in 2020. As speculation mounts over whether we will see an Ethereum bull run 2021, some are right to ask “will it be different this time?”. Specifically, the previous 2017 - 2018 Ethereum bull run was mainly caused by a massive influx of retail investors. However, as institutional investments in crypto increase, investors with deep pockets are now also waking up to the potential held by Ethereum.
Ethereum (ETH) is approaching its all-time high
Furthermore, Ethereum can be adopted on a protocol level. Applications built on the Ethereum blockchain are already redefining major industries. These include healthcare, supply chain management, and the fashion industry. This suggests that the price of Ethereum moving forward could stabilize as adoption by institutions and enterprises may be based on more than just speculation.
Now that institutional investors are comfortable with Bitcoin, many of these are looking to diversify their holdings. For this, Ethereum is the obvious choice, as it is still below its all-time high seen in 2018. The adoption of Ethereum-based protocols is set to disrupt the traditional financial sector.
During the ICO boom of 2017, the vast majority of Initial Coin Offerings (ICOs) were built on Ethereum. Therefore, ETH demand increased as more people participated in ICO’s and ETH was the currency used to invest in new coin offerings. Ethereum reached its all-time high of $1448.18 on 13th January 2018 (according to CoinGecko, although the price may vary slightly across exchanges). As the ICO boom became stagnant toward the end of the 2017 - 2018 bull run, ETH saw a huge increase in supply and a decline in demand. This was reflected by the price action of Ethereum thereafter. Ethereum dropped by approximately 90% to around $85.
From January 2020, ETH refound its footing, rising in price from around $130 ending the year at $738.
It is clear that interest in Ethereum is currently high. The Google search volume for Ethereum recently hit an all-time high - a clear indication of growing interest in Ethereum. In fact, digital buzz about this premier altcoin has even exceeded that of the previous Ethereum bull run. This is another key indicator that people are beginning to wake up to Ethereum. In a similar way to the growing mainstream adoption of Bitcoin throughout 2020, Ethereum is becoming recognized as the future of financial infrastructure.
Ethereum has seen a roughly 80% increase in price over five days during the first week of the year from 2nd January 2021. Despite a 17% correction, the buying pressure for Ethereum remains strong. On 4th January, we saw a 23% pullback in a day - however, this was quickly snatched up as ETH regained momentum.
As such, many view it that the Ethereum bull run 2021 has already begun, with ETH less than a couple of hundred dollars away from its all-time high. Once ETH breaks the psychologically important $1,500 barrier, there is no telling to what price point Ethereum might surge.
Moreover, Ethereum tends to follow Bitcoin's price performance, and Bitcoin has already seen it’s previous all-time-high smashed - and has since doubled it. Ethereum broke its previous all-time-high in terms of market capitalization on January 7th, 2021, though is still yet to reach its January 2018 price high. Many bulls speculate that Ethereum might be close to taking off and similarly smashing through its previous all-time high price level.
As general crypto adoption increases and Ethereum enters brand new territory, Ethereum price predictions will be all over the place. How high can Ethereum go, and what’s in its future? We’ll take a look at some of the things in Ethereum’s future.
Some of the more concrete Ethereum predictions 2021 are those regarding Ethereum’s upcoming roadmap. Specifically, it’s a good idea to know what to look out for with the development of Ethereum 2.0. Moreover, an Ethereum Improvement Proposal, EIP-1559, suggests bringing token burning to Ethereum and could be implemented in 2021. When tokens are burned, this reduces the circulating supply and therefore makes an asset more scarce. As digitally-verifiable scarcity is the key value proposition of Bitcoin, this proposal could add a new dimension to Ethereum.
Currently, gas fees are relatively high on the Ethereum network. This is hindering the growth and adoption of the network as it prices some people out of the market. EIP-1559 could bring about a deflationary element, by burning Ethereum when gas is spent.
This token burning will not burn all ETH in existence. However, it will appeal to investors by directly addressing one of the major criticisms about Ethereum regarding the max-supply of ETH. This will appeal to long-term investors in a way that steered many away from ETH in the past.
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No wonder people are looking into Ethereum! The prospect of a potential Ethereum bull run 2021, alongside exciting Ethereum predictions being suggested across the community, implies there are even more interesting things to come. What’s more, 2021 could see growing institutional investment in Ethereum, as institutional appetite for crypto grows and institutional crypto investments become increasingly common. Moreover, new investment venues for Ethereum could also be imminent, with the CME Group announcing Ethereum Futures launching on February 8th.
At the same time, it is also possible 2021 will see an increase in the growth of ‘Weird DeFi’ or yield farming. New platforms are being created on Ethereum, plus for the Ethereum bull run 2021, there’s the introduction of new interoperable platforms such as Polkadot and Matic. This will give Ethereum a wider market with developers using Ethereum’s liquidity whilst building on other chains. Therefore, it seems a safe prediction to say we’ll see an increase in the total value locked (TVL) in Ethereum.
As most stablecoins are built using Ethereum, this could be extremely bullish for the long-term growth and development of the network. Furthermore, this points to increased interoperability between the traditional financial sector and Ethereum.
Other realistic Ethereum predictions for 2021 include further Ethereum-based integrations with large institutions and enterprises. Integrations with huge global companies such as Coca-Cola and Microsoft point toward increased enterprise adoption of Ethereum in 2021.
Ethereum has traditionally been seen as the lifeblood of the DeFi industry. At the beginning of November 2020, the total value locked (TVL) in DeFi was $10.28 billion. The following month it closed at $13.5 billion, rising to $15.3 billion by the end of the year. Astonishingly, in the first week of January, the TVL in DeFi has shot past $23 billion, at the time of writing. Except for the Lightning Network, DeFi Pulse TVL accounts for 59 protocols all built on Ethereum.
Demand for Ethereum wrapping services ramped up significantly in Q4 of 2020. Wrapped Bitcoin (WBTC) allows users to lock up Bitcoin to “wrapped” and used in Ethereum-based DeFi protocols and held in Ethereum wallets. WBTC has shot up to the 13th largest cryptocurrency by market cap recently. This shows that Bitcoin holders are similarly eager to get in on the Ethereum-based DeFi action.
In summary, the Ethereum bull run 2021 could potentially be bigger than ever, aided by increased retail and institutional investors. Ethereum is the foundation of decentralized finance and is, therefore, an incredibly interesting prospect for the future.
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