Ethereum Price Chart (ETH)

What Is Ethereum?

Ethereum is a cryptocurrency like Bitcoin, but the software underpinning it is designed to offer more functionality. Developers can use it to power “smart contracts” – code which allows transactions more complex than the simple A to B transfer of tokens.

For example, users can send Ethereum tokens to a contract address and automatically receive one or more different tokens in return.

This type of smart contract has been used in Internet Coin Offerings – or ICO’s – to fund startup companies. Investors sent Ether in. The recipients could then sell that Ether for cash needed to fund their operation. In return, the investors received tokens representing ownership in the new company which they hoped would increase in value, should the company succeed.

The Securities and Exchange Commission has targeted companies for raising capital in this manner. The regulator claims jurisdiction over tokens which function as securities, much like it does for public companies issuing shares.

However, the regulator is powerless to actually stop or control transactions done on the Ethereum network. There is no single organization operating the network for regulators to target. It is powered by computers scattered around the world, by a variety of unidentified people. This decentralization is a prime feature for people seeking freedom to build and transact beyond the reach of regulators.

Ethereum transactions are logged on a blockchain network, which has many benefits in comparison to more traditional payment networks. Ethereum (ETH) is an alternative monetary system, like Bitcoin, but offers more functionality at the cost of much greater complexity. Developers can use the network to do more, but with a greater risk of bugs and hacker exploits.

The cryptocurrency can also be viewed as an investment asset. Ethereum differs from Bitcoin in that its ultimate supply is not capped. Proponents believe that the network’s higher functionality and utility will drive prices higher. ETH relies on ether tokens as its unit of currency, and its price has increased significantly since its launch in 2013.

Like other cryptocurrencies, ETH maintains such benefits as convenience, security, and lack of censorship. Through an open record of transactions on its network, Ethereum offers transparency and trust.

How High Can the Price of Ethereum Go?

The sky is potentially the limit for Ethereum prices, at least when viewing performance since 2013. There was an increase in value of over 3,000% for ether tokens between 2016 and 2017.

Ethereum’s price will be a function of how well the network can attract users and whether the network can process transactions at larger and larger scale. And how well it holds up to the competition.

Today there are alternative networks, such as EOS, offering “smart contract” functionality, and the ability to process more transactions per second. It is a race by cryptocurrency software developers to see who can not only build the best mousetrap, but succeed in attracting users for the trap.

Ethereum, being the first network of its kind, has some advantages. In 2017, JP Morgan Chase and Microsoft, along with a few other firms, founded the Enterprise Ethereum Alliance. These organizations are exploring options for using the network in their own operations. Interest from these large corporations has given a boost to the Ethereum price.

Based on a 2017 business survey, almost 94% reported positive feelings about ether tokens. Bitcoin did not fare as well, with only 49% feeling as positive. Such feedback bodes well for how high the price of Ethereum can go.

Despite no cap on ether tokens, Ethereum’s price has not disappointed investors who got in early. While past success does not guarantee future growth, Ether tokens are a high risk/high reward option for investors.

Why Did the Ethereum Price Spike?

Ethereum promises to deliver smart contract capability along with the advantages of a decentralized blockchain. As more people consider just what this innovation can mean for the world, speculators began pouring money into the tokens. The price had a meteoric rise in 2017 as cryptocurrency mania began to spread and cryptocurrency prices began to skyrocket.

The establishment of the Enterprise Ethereum Alliance in 2017, also added credibility. Growing interest from large corporations signaled that serious people see big potential for Ethereum.

The spike in the Ethereum price may also have something to do with the additional capability it provides versus Bitcoin. Ethereum offers something akin to Bitcoin's decentralized and trustless network plus the ability to handle more complex transactions.

Ethereum prices benefited from rising adoption. Merchants began accepting it as a method of payment. A network effect implies that as ether tokens gain popularity and utility with users, they will increase in value.

Developers around the world are working on applications to deploy on Ethereum’s decentralized platform. The first “killer app” was the ICO boom in 2017. Ethereum prices surged as investors needed the tokens to participate in a huge number of other coin offerings.

Why Did Ethereum Price Drop?

Ethereum prices crashed hard in 2018. It can be argued the cryptocurrency mania which gripped speculators in 2017 resulted in a bubble. The price simply got too far ahead of the token’s fundamentals, such as adoption and its ability to scale.

The price is also a victim of regulatory concerns. The SEC and other government agencies around the world clamped down hard on ICOs. They seek to protect their turf and that of their friends in traditional banking and brokerage. As result, the flood of money pouring into this unconventional funding method for new companies and projects mostly dried up.

The Ethereum network has also struggled to implement needed upgrades to improve security and increase scalability. Decentralized projects present challenges when it comes to governance. Decisions have to be made collectively. Gaining the majority agreement needed to make upgrades can be difficult.

There has been plenty of public in-fighting and heated disagreement about the best path forward for Ethereum and other major cryptocurrencies. That raises legitimate questions about whether needed improvements will ever gain approval.

In August 2019, Vitalik Buterin, one of the creators of Ethereum shared concerns regarding the network. It was disheartening for users to learn nearly half of the computing power underpinning Ethereum is actually provided by cloud computing services from firms such as Amazon. The implication is the network is not nearly as decentralized as people had thought.

How to Buy Ethereum?

There are a variety of options for buying Ethereum. The most common, by far, is to purchase the tokens via an exchange. Buyers can open an account and fund it by sending a currency, such as US dollars, or other cryptocurrencies. They can then use those funds to purchase Ethereum.

Following the purchase of ether tokens, users may leave the tokens with the exchange or withdraw them to a “wallet” which they control. Leaving the coins at the exchange is convenient, but presents security risks. There have been many high-profile examples of theft from exchanges. They represent a huge target for thieves. Stealing the credentials needed to gain access to an exchange wallet can mean access to large troves of coins worth millions of dollars.

That is why security conscious investors generally choose to withdraw their coins and place them in a wallet they control.

Ether tokens may also be obtained by the process of mining if one has the appropriate hardware and skills.

As with any digital currency, Ethereum comes with its benefits and drawbacks. If individuals interested in making a significant investment in ether tokens should take the time to do additional research. It is not simple to make an informed decision when it comes to Ethereum, but lots of good information is readily available online.