In today’s video, host Jessica Walker runs through a similar situation that has already occurred in bitcoin – a lack of liquidity in ethereum. If exchanges are running out, how could this affect the price?
Ethereum continues to be a major player in the cryptocurrency space, even with the relatively high transaction fees during certain periods.
Ethereum has seen a dramatic increase in price in 2021. It has surged nearly 100% since January 1st, 2021. Now ranging just below its previous all-time high of $1,440, ether continues to gain popularity for several reasons.
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The Rise of DeFi
Decentralized Finance (DeFi) can be attributed to the rise in popularity of the second-largest blockchain. It has witnessed phenomenal growth as DeFi Dapps continue to grow. Dapp transactions exceeded $270 billion in volume, with ethereum representing 95% of all volume.
All-Time Highs Across the Board
Ethereum’s exponential growth shows in several key areas, including block utilization, hashrate, DeFi users, total locked value, institutional holdings, and staked ethereum to name a few. The ether price recently also hit a new all-time high on some exchanges.
Ethereum 2.0 Attracting Demand
The Beacon chain will provide consensus to all shard chains. This will allow information to be shared between shards, thus scaling the network.
Supply vs Demand
While the demand for ether continues to rise, the number of tokens sitting on exchanges continues to decline. According to blockchain data analysis firm Santiment, only 22.06% are on exchanges. That’s a drop of 4.27% over the past five months.
Ethereum 2.0 Staking
One of the more common reasons for a lack of liquidity will be the amounts staked on the Beacon Chain. According to the ETH 2.0 Launchpad, there is now a total of 2.65 million being staked. This rapid increase represents over $3.7 billion in value.
The increase now means that 2.31% of the circulating supply is being staked, up 0.74% within the last month. Ethereum continues to grow in popularity and most recently saw over $3 billion in transaction volume over Bitcoin.
2021 will likely see more staking, more approved validators, and the price eventually benefit from scarcity. The lack of liquidity could likely usher in a new all-time high.