Ethereum: What will drive the price of ETH in the year ahead?
Editor's Note: This article comes fromChain reference (ID: lianneican), Author: Internal Reference Jun, reprinted by Odaily with authorization.
Editor's Note: This article comes from
Chain reference (ID: lianneican)
, Author: Internal Reference Jun, reprinted by Odaily with authorization.
Ethereum, the world's second-largest cryptocurrency, is up less than 5% in 2019, and ETH has underperformed Bitcoin this year. Despite the previous sell-off, BTC has managed to hold on to a staggering 95% year-to-date gain.
Given Ethereum's successful implementation of its latest network upgrade known as Istanbul, and the growing popularity of decentralized finance, is it a viable strategy for investors to invest in ETH at this time? From a macro perspective, The recognition of Ethereum among financial institutions has increased significantly. But what does this mean for the average ETH investor?
From the beginning of the year to the end of the year, ETH performance was flat
Bitcoin has been the most widely used cryptocurrency in the world. It often serves as a benchmark for the broader crypto space, and its performance has been an important market focus since day one. In fact, the cryptocurrency market looks very different today than it did when Bitcoin debuted. The rapid development of the crypto space has broadened its scope, leading to a growing appetite for altcoins such as ETH, XRP and EOS.
Figure 1: Year-to-date performance of Ethereum and Bitcoin
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Source: TradingView
While many factors could be attributable to ETH's underperformance, multi-layered analysis can provide us with a more complete picture of Ethereum and indicate whether its price has the potential to be decisive in the long run.
In the Internet age, investors sometimes find it difficult to value companies in the new economy when trying to use traditional valuation methods. FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google) are a good example. Despite the criticism, the most powerful conglomerate of tech giants has been one of the key drivers of the stock market for quite some time.
Source: Etherscan.io
Similar to FAANG stocks, many believe that cryptocurrencies are also network value-driven assets, meaning that the more people who use it, the more valuable it becomes. There are over 81 million unique addresses across the entire Ethereum network, and this number has been growing steadily since early last year.
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Since reaching 600,000 Ethereum addresses in June 2019, the number of active Ethereum addresses has remained stable at around 300,000. Likewise, the number of active Bitcoin addresses has fluctuated between 500,000 and 700,000 in the second half of the year after reaching 900,000 Bitcoin addresses at the end of June.
Figure 3: 1-Year Chart of Ethereum and Bitcoin Active Addresses
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Source: Bitinfochart
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Drivers of Ethereum Growth
Ethereum is the biggest backbone in the entire DeFi world. DeFi has as many as 2.7 million ETH locked in the system, or 2.5% of the total ETH supply, according to DeFiPulse. Maker alone has at least $325 million locked in DeFi, accounting for about half of the value locked in DeFi.
Source: IntoTheBlock
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Source: DeFi Pulse
Figure 5: Total value locked in DeFi (USD)
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Source: DeFi Pulse
From a macro perspective, the birth of DeFi has also changed the market's expectations of Ethereum, from a utility token to a high-value transaction settlement application. Additionally, while Bitcoin has long been considered a store of value, DeFi could also pave the way for Ethereum to strengthen its store-of-value characteristics. We expect this shift to become more pronounced in 2020 as the DeFi market rapidly expands.
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Enterprise participation wins the future
Earlier this month, banking giant Standard Chartered announced its participation in the Enterprise Ethereum Alliance. The European Economic Area (EEA) claims it is an organization dedicated to developing open, decentralized web and blockchain specifications for businesses and consumers around the world. Other large multinational banks such as JP Morgan, ING, Citibank and BBVA are already members of the EEA.
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While this may not be Standard Chartered’s first blockchain investment, as the bank also has a strategic partnership with Ripple, particularly in payments, joining the EEA not only shows the bank’s desire to further adopt blockchain technology, but Possibly focusing on Ethereum or even ETH.
