The last hike in cryptocurrency popularity was in 2018; before then, the digital currency world has not experienced massive growth. Unexpectedly, a similar occurrence surfaced at the beginning of 2021. A good demand and supply flow majorly caused the 2018 bloom. However, people wonder about the sudden bloom in 2021, despite the world just coming out of a pandemic outbreak in 2020. Ironically, the crypto market experienced a great push, which also influenced Ethereum’s price. This leaves cryptocurrency experts to conclude the pandemic as one of the factors changing the crypto industry.
Furthermore, this article discusses factors changing the crypto industry. Read till the end to discover the elements that greatly influence the market flow.
1. Price Volatility
There is no doubt Ethereum price, like other cryptocurrencies, is highly volatile, but what effect does it have on the industry at large? Unfortunately, cryptocurrencies price volatility negatively affects its emergence. Many new coin investors are skeptical about digital investment, as they show concern about losing their money to the unstable market.
Ethereum’s price in April 2021 reached over 2,500 US dollars. Research shows that the sudden increase in volatility could result from a digital art piece that was sold for over 38,000 ETH. This digital art piece being the world’s most expensive NFT attracted many investors into the Ethereum currency.
Ethereum price volatility can be minimal if its community has a common goal. However, this is not likely to take place in blockchain technology.
If cryptocurrency becomes widely adopted by government regulations, it can control the price volatility to some extent. In this case, some boards can directly make decisions about the market supply and demand. However, this will breach the decentralization system. Users’ privacy will be at risk, as information can reach a third party, becoming a threat to business owners.
As long as the market remains decentralized, price volatility is therefore inevitable. Therefore, investors should constantly watch the market trend, listen to experts, and closely monitor price changes.
2. Blockchain Development
Ethereum is known to undergo different development phases, especially the ETH 2.0 project. Firstly, the Berlin update, which was targeted towards reducing Ethereum transaction or gas fees, excited so many investors that they saw it as an opportunity to diversify their portfolio. In May 2021, Ethereum developers launched another smart contract known as Uniswap V3, which improves investors’ trading experience. All these developments have relatively increased Ethereum price, which is a fortunate turnaround for long-term investors.
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“After you have activated 2FA for your Bitvavo account, you will have to provide your username and password (the first factor) and subsequently an additional 2FA-code (the second factor). Two-Factor Authentication (2FA), also known as Authentication in two steps, is an additional security measure on the top of your username and password.”
3. Regulatory Pressure
Research shows that the regulatory pressure on cryptocurrency is more intense in 2021. The U.S. Department of the Treasury proposed a blockchain means of imposing a tax on its citizens. As this regulatory pressure increases, it boosts cryptocurrency popularity.
These regulations aim to curb the malicious acts of escaping government’s policies. More so, it would reduce the rate of fraud or illegal activities associated with public finances.
Another sector of cryptocurrency with regulatory pressure is exchange platforms. For centralized exchanges, governments are looking into preventing market manipulations and monitoring citizens’ financial outputs. However, some investors do not agree with this idea and would instead trade on decentralized exchanges. Nevertheless, you can trust legit exchanges like Bitvavo, which allows users to go anonymous. Hence, your transaction history can remain unknown as long as you want.
In the real sense, users hardly use cryptocurrency for illegal activities, although it is liable for this purpose. Therefore, regulatory bodies partaking in cryptocurrency can affect Ethereum price. Inflation and deflation would become tools for measuring digital currency, just as we have it in fiat currencies. Hence, experts believe the right solution to cryptocurrency drawbacks is the government treating it more as coins than thrash. If the power group of the society does not believe in cryptocurrency sustainability, then it is a just call for the crypto community.
Technically, Ethereum is not a currency but an open-source software that allows blockchain development. Hence, Ethereum price is majorly influenced by its adoption in the market sector. This affects both business owners and investors who prefer digital transactions to fiat currencies.
Although Ethereum price is often unpredictable, the Decentralized Finance (DeFi) system provides a direct means of transaction without an intermediary. Many other wallets were launched into the market to serve this purpose, including Bitvavo.