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What is the Ethereum market cap, and will it grow in 2020?

By Connor Freitas

The Ethereum market cap has practically doubled since the start of the year. What’s the driving force behind this, and will it last?

The Ethereum market cap has had quite the start to 2020. Back on 1 January, it stood at $14.4bn. This was more than enough to make Ether the world’s second-biggest cryptocurrency, but this hasn’t stopped ETH from delivering price growth that has comfortably outstripped Bitcoin and a plethora of other altcoins.

Year to date (at the time of writing), the Ether coin price was by more than 90 per cent to settle at about $250. There aren’t many cryptocurrencies that have been able to match this growth. BTC has grown 36 per cent since 2020 began, while XRP has appreciated by 47 per cent. So: will Ethereum rise more?

Ethereum price news

At the time of writing, the Ethereum market cap stands at $27.7bn, almost double what it was less than two months ago. It’s an impressive increase – and looking at how Ethereum works, as well as recent developments concerning the cryptocurrency and its wider ecosystem, could help offer an insight into what’s been going on.

Many decentralised finance applications (often known as DeFi for short) are built on the Ethereum network. This is where blockchain technology, digital assets and smart contracts are used to provide everyday financial services to the public at large.

It’s becoming increasingly possible to access crypto loans, and gain interest on crypto savings, as the industry becomes more sophisticated. Figures from DeFi Pulse suggest that $1.08bn in funds are currently locked into such platforms across a diverse range of cryptocurrencies – and most of these assets are ERC-20 tokens, which are based on the Ethereum blockchain.

Of course, there’s a long way to go before such services go mainstream. Crypto-focused financial products only represent a sliver of the overall market. Ethereum advocates argue that their blockchain is best placed to deliver widespread adoption because it offers clearly defined use cases. The fact that major cloud computing brands such as Amazon Web Services and Microsoft Azure rely on this platform – not to mention banking giants such as JPMorgan – will undoubtedly have had an impact on the Ethereum market cap too.

Ethereum history

Given that Ethereum has been around for less than five years, the fact that it’s at a market cap of $27.7bn now is nothing short of remarkable. The lowest price ever recorded for ETH stood at $0.42 back in October 2015 – advancing to highs of $1,432.88 in January 2018 as the crypto bull market reached its grand finale. At the time of writing, one ETH would set you back $247.34. Given how highs of $287.12 were achieved just a week earlier, it’s fair to say that the Ethereum market is subject to the same levels of volatility as other major cryptocurrencies.

San Jose State University recently performed in-depth research into ETH price history. They wanted to study Ether’s performance against other assets, and said: “We find that Ether is a hedge against the US stock and gold markets. Also, Ether tends to behave as a safe haven for gold markets. When currency markets are concerned, we document that Ether is a diversifier for the US dollar.”

Although the time period covered by this research focuses on 2018 – the immediate aftermath of the crypto bubble bursting – the findings could be interesting for those who are considering whether they want to invest in Ethereum. Put in slightly plainer English, these academics are saying that ETH could be helpful for those who want some diversification in their portfolio on an intraday basis.

Finally, let’s wrap up with a Bitcoin to Ethereum comparison. Back when Ethereum peaked on 13 January 2018, one BTC would get you about 10 ETH. These days, a single Bitcoin is worth approximately 37 ETH. This tells us that, when the currencies are paired, ETH has weakened substantially.

There are some factors behind this. Firstly, the Ethereum platform was disproportionately affected when the bubble of initial coin offerings burst in 2018. Many of these start-ups, which went on to collapse, relied on ERC-20 tokens that are built and distributed through its blockchain. ETH has also been facing some stiff competition from a plethora of altcoins – and although its blockchain is going through some technological upgrades to tackle scalability concerns, the benefits of this could be a couple of years away yet.

FURTHER READING: Ether and Ethereum: what is the difference?

FURTHER READING: Bitcoin vs Ethereum

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