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Ethereum (ETH) hits an all-time high, again

By Robert Davis

18:18, 8 November 2021

Ethereum token in front of an exchange
Ethereum - Photo: Shutterstock

Popular decentralised finance (DeFi) token Ethereum hit an all-time high by noon EST (17:00 UTC) on Monday after the digital asset crossed the $4,700 (£3,466.65) threshold.

So far this year, Ethereum has gained nearly 550% in its per-unit value, according to data from CoinDesk.

The rally also helped push other popular DeFi tokens higher on the day. Terra, Avalanche, and Chainlink were all up more than 5% by noon as well.

Bitcoin also neared another all-time high on Monday after crossing $66,000 per-unit before cooling off again.

Structural shift

Some analysts are describing Ethereum’s recent run as a “structural shift” in the way cryptocurrency investors view centralised custodians, service providers, and their decentralised counterparts.

Jeremy Ong, data lead at Delphi Digital, wrote in a note to investors published on 2 November that “hot money” is driving the popularity of Ethereum as investors seek higher returns.

“Many DeFi users also bridge ETH onto other chains for the same reason,” Ong wrote. “As DeFi and multichain activity continues to take off, we expect this trend to continue.”

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Gas prices

Another reason for the recent climb for Ethereum is rising gas prices, according to Ong.

Between August and September, Ethereum’s median gas price climbed to 104.31, representing a 2,400% increase over 24 hours, according to trading data from Gemini.

SOL/USD

174.11 Price
-0.480% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 2.2652

XRP/USD

0.59 Price
-2.550% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.01168

DOGE/USD

0.13 Price
-1.770% 1D Chg, %
Long position overnight fee -0.0753%
Short position overnight fee 0.0069%
Overnight fee time 21:00 (UTC)
Spread 0.0012872

BTC/USD

67,048.80 Price
-0.610% 1D Chg, %
Long position overnight fee -0.0616%
Short position overnight fee 0.0137%
Overnight fee time 21:00 (UTC)
Spread 106.00

As a result, the ETH percentage supply — which measures the supply of the unit that powers the Ethereum blockchain — has been trending downward from approximately 27% to 12%, according to Delphi Digital.

However, the supply of ETH deposited from Smart Contracts increased from 10% in June to nearly 21% by 2 November, primarily because of a surge in non-fungible token transactions.

Deflationary week

The combination of high gas prices and increased on-chain activity collided last week to give Ethereum its first deflationary week since its inception.

Ong said the liquidity that left many exchanges last week contributed to what he calls a “supply shock” that will send Ethereum’s prices higher as demand for the asset continues to climb.

“If we expect volatile price action to continue in the coming months it could keep gas prices high, which risks pricing out a large cohort of smaller retail users,” Ong wrote.

“There’s also a balancing force at play here; when gas prices on Ethereum are too expensive, on-chain activity (and therefore demand for block space) may fall, reducing demand for ETH, which can have an adverse impact on price (all else held equal),” he continued.

To prevent a rollback of price gains, Ong says Ethereum scaling solutions like StarkNet, zkSync, and Arbitrum will need to gain traction soon, otherwise the Ethereum network could get bogged down with high transaction costs that further impede price gains.

Read more: Ethereum vs Ethereum Classic: differences you need to know before investing

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