This week in crypto: How Ethereum broke $3,400
As Bitcoin struggles to regain recent all-time highs, Ethereum keeps breaking records. Plus: new crypto moves from fintech firms
Published on May 3, 2021
Ethereum breaks $3,400 – what’s driving the surge?
Throughout the week, as Bitcoin continued struggling to regain recent all-time highs, Ethereum went on a record-breaking tear, hitting a new peak price earlier today of just over $3,400. At the beginning of the year, the second-biggest cryptocurrency by market cap had yet to break $500 — and as Ethereum has spiked, it’s driven the value of 27-year-old co-creator Vitalik Buterin’s personal holdings to more than $1 billion. (Ethereum is also now worth more than corporations including Disney and Bank of America; learn how to buy ETH, how it works, and much more in our Ethereum explainer.)
Bitcoin’s trillion dollar market cap still dwarfs Ethereum’s approximately $350 billion, but in terms of momentum, Ethereum has taken a big lead. Since the beginning of the year, Bitcoin’s price has nearly doubled. Ethereum prices in the same period? Nearly seven times higher — as the smart contracts its blockchain makes possible have powered a vast array of increasingly popular new technologies, from decentralized finance (or DeFi) to NFTs.
Let’s break down some of the factors likely contributing to Ethereum’s growth:
The Ethereum blockchain powers some of the fastest-growing parts of the cryptoeconomy, from DeFi to stablecoins — both of which are seeing new all-time highs. This week, the total value of assets locked in DeFi broke the $70 billion mark and the total value of Ethereum-based stablecoins like USDC and Dai has surpassed $50 billion.
Four Ethereum exchange-traded funds (or ETFs) have launched in Canada — allowing mainstream investors there to gain exposure to ETH via their regular brokerages. In their first couple of weeks, Canadian ETH ETF trading volume has already surpassed $138 million. (Learn more about what ETFs are and how they work.)
The number of daily active addresses using Ethereum has reached all-time highs — indicating the arrival of new users.
Institutional investors on Wall Street and beyond are clearly thinking beyond Bitcoin. In April, open interest for Ethereum futures on the Chicago Mercantile Exchange hit an all-time high. Open interest refers to futures contracts that have yet to be settled.
The European Investment Bank (the lending arm of the EU), is reportedly issuing €100 million worth of bonds on the Ethereum blockchain in a sale facilitated by major banks including Goldman Sachs and Banco Santander.
Metamask, one of the most popular Ethereum wallets, has recently surpassed five million monthly active users, up from 1 million in October. Its user base shows how truly global Ethereum is: countries with the most Metamask mobile users include India, Indonesia, Vietnam, and Nigeria. Developing economies often experience high inflation and less access to traditional banking, making them ideal environments for cryptocurrency adoption.
One side effect of Ethereum’s booming popularity has been rising “gas” costs — fees paid in ETH to use the network.
Solutions are on the horizon, though, including the ongoing upgrade to the Ethereum 2.0 blockchain. Over four million ETH have been locked in the ETH 2.0 contract, accelerating the shift to proof of stake — which will theoretically enable much faster transactions and lower costs. (Learn more about how ETH2 works and how to stake some of your crypto and earn rewards.)
In the meantime, Ethereum congestion is being relieved by “layer 2” solutions such as Polygon, which has seen a huge rise in activity — and actually processed more transactions in recent weeks than Ethereum itself (according to wallet analytics firm Nansen). Polygon, formerly known as Matic, is a blockchain that runs alongside the main Ethereum network and offers higher speeds and lower fees — think of it like a highway that runs above surface streets. The same way cars on a highway can periodically take an exit and rejoin surface traffic, layer 2 transactions periodically settle on the main chain.
And ETH2 isn’t the only forthcoming Ethereum protocol development likely driving investor interest. This July, an upgrade with the deceptively boring name EIP-1559 is scheduled to take effect (“EIP” stands for Ethereum Improvement Protocol). It changes the way miners are paid, in part to make fees for users more predictable. But it will also reduce the circulating supply of ETH. Assuming demand remains stable, ETH’s price could rise as a result.
Understand how DeFi, NFTs, stablecoins and more have all contributed to the rise of the Ethereum economy with our special report.
New crypto moves from fintech firms, eBay seeks to sell NFTs
Robo-investing firm Wealthfront and personal-finance apps Revolut and SoFi announced new crypto initiatives this week. Wealthfront said that it will enable crypto investing later this year for its base of millennial and Gen Z users. U.K.-based Revolut is enabling Bitcoin withdrawals for its 15 million users, setting itself apart from platforms such as Robinhood and Paypal which let users buy and sell crypto, but don’t allow them to send it to another wallet or spend it. And holders of SoFi’s cash-back credit card can now earn Bitcoin and Ethereum rewards. Meanwhile...
In an interview on CNBC, eBay CEO Jamie Iannone said the company is looking at cryptocurrency as a payment option and is exploring ways of auctioning NFTs.
On Visa’s earnings call this week, CEO Al Kelly said the company is moving into crypto “in a very, very big way,” including helping customers buy and spend crypto, making it easy for merchants to accept crypto, and exploring stablecoins and central bank digital currencies.
Thousands of the most popular institutional investment funds in Germany are now allowed to invest in crypto. Deutsche Börse, one of Germany’s largest stock exchange operators, is also planning to develop blockchain-based markets for art and real estate.
Korean gaming firm Nexon (listed on the Tokyo stock exchange), bought $100 million in bitcoin. It is the latest in a series of publicly-traded firms — including Tesla and MicroStrategy — to hold bitcoin in its corporate treasury.
JPMorgan, DBS, and Singapore state investor Temasek have formed a new blockchain company with the goal of improving cross-border payments — citing the technology’s ability to enable 24/7, frictionless payments.
In Coinbase news, you can now use a PayPal account to buy crypto; chief security officer Philip Martin spoke to Yahoo Finance about key ways to protect your account (top tips: use a password manager and two-factor authentication); and we launched a new philanthropic organization, Coinbase Giving.
Wondering which cryptocurrencies would have provided the biggest return on investment (or ROI) over the last week, month, and year? Our weekly chart shows how you would have done: