Ethereum Leaps Over $4,000 For First Time in History — What’s Driving The Rally?

Belgium (CoinChapter.com) — The Ethereum price momentum is taking the cryptocurrency industry by storm. After overcoming the $4,000 hurdle, the ETH price is now en route to hitting $4,200 soon. As the momentum intensifies, it remains essential to look at the bigger picture.

Outstanding Ethereum Price Momentum

It is safe to say the Ethereum price is a rollercoaster that seemingly does not want to stop. Whereas Bitcoin has struggled to surpass $60,000 in value again, Ethereum has hit one all-time high after another. Following a 100.6% price increase in the past 30 days, the price is now entering uncharted territory once again. Considering how the price was below $3,000 just a few days ago,  it is evident the bulls may not be done yet.

Several factors affect the Ethereum price, including the [seemingly] growing demand from US investors. Whether the investors are institutional or otherwise is unclear, yet the ETH premium on the Coinbase platform has increased rather substantially. The Coinbase premium increase has started to increase in early December of 2002 and is still rising today.

The demand for ETH on Coinbase can serve as an indicator of growing institutional demand. Regardless of where the volume comes from, a lot of money is pouring into the cryptocurrency market lately, and it seems people are less interested in buying Bitcoin. The demand for Ethereum can be driven partially by the London hard fork – which introduces EIP-1159 – that will overhaul the fee market entirely to make it easier for users to pay fair transaction costs. The network will burn gas fees.

The Deribit ETH Strike

Another intriguing development worth keeping an eye on is Deribit’s ETH strike. The contract expires in March 2022 yet has a projected ETH value of $50,000. A very bullish sentiment toward the second-largest cryptocurrency by market cap. However, this does not constitute that Ethereum will hit a $50,000 value in the next few months. A strike is very different from an actual price target.

Compared to its current value, that would require a near eleven-fold increase in value per Ether. While that is not necessarily impossible to achieve, it seems unlikely to expect such prominent price momentum in the next ten months. A price increase of over $4,600 per month is not sustainable for any cryptocurrency asset unless something significant happens.

The EIP-1559 and seeming increase in institutional demand for ETH can catalyze the price in the months to come. A lot of that momentum hinges on whether Ethereum will remain an appealing option to speculators, traders, and investors. The project has a much higher circulating supply than Bitcoin, and the price can only go so high as long as that remains unchanged. 

Closing Thoughts

A lot of factors are coming together for Ethereum at this time. The rising price, combined with the upcoming shift to proof-of-stake through Ethereum 2.0, can drive increasing demand for this asset. The prospect of reducing overall gas costs can make Ethereum’s ecosystem far more appealing as well.

As is to be expected, this price shift triggers speculation as to how Ethereum will ‘flip” Bitcoin in the market cap. In the past, that has always seemed unlikely. However, Ethereum’s market cap is now $478.5 billion, whereas Bitcoin struggles to get past $1.1 trillion. The gap may not seem as big as it once was, yet there is still a very long way to go before any “flippening” can take place.