Introduction

As the second largest cryptocurrency in the world, Ethereum (ETH) occupies a pivotal position in the cryptocurrency market. Since its launch in 2015, Ethereum has built a vast decentralized application (DApps) ecosystem with its unique smart contract functionality. It is widely used in various fields such as decentralized finance (DeFi), non-fungible tokens (NFT), games, social media, attracting a large number of developers and users globally. This has made ETH one of the focus assets in the cryptocurrency market.

In recent years, with the continuous development of blockchain technology and the expansion of application scenarios, the fluctuation of ETH prices not only has a significant impact on investors’ asset allocation and returns, but also reflects the development trend and market sentiment of the entire cryptocurrency market. Accurately predicting the price trend of ETH is of great significance for investors to formulate reasonable investment strategies, risk management, and seize market opportunities. At the same time, for researchers in the blockchain industry, in-depth analysis of the factors affecting ETH prices helps to more comprehensively understand the operation mechanism and development laws of the cryptocurrency market, providing theoretical support and decision-making reference for the healthy development of the industry.

Ethereum Overview

2.1 The Development History of Ethereum

The concept of Ethereum was first proposed by Vitalik Buterin in 2013. In the whitepaper, he elaborated that Ethereum is not only a cryptocurrency but also a decentralized computing platform that can run smart contracts, providing developers with the foundation to build various decentralized applications. This innovative concept has attracted the attention of many developers and investors, leading to the development of Ethereum.

In 2014, the Ethereum team raised funds through an ICO (Initial Coin Offering) to support the further development of the project. During this process, Ethereum issued its native cryptocurrency Ether (ETH), providing a value foundation and incentive mechanism for the Ethereum ecosystem.

On July 30, 2015, the Ethereum mainnet was officially launched, marking Ethereum’s transition from concept to practical application. In the initial stage, Ethereum mainly targeted developers, providing basic smart contract functionality that allowed developers to deploy and run their own applications on the Ethereum blockchain. Despite the many imperfections at the time, Ethereum’s emergence paved the way for the development of blockchain technology, sparking a global frenzy of blockchain application development.

In the subsequent development process, Ethereum has undergone several important upgrades and improvements. In March 2016, Ethereum underwent the ‘Homestead’ upgrade, which was the first stable version of Ethereum, mainly improving the performance and security of smart contracts, while introducing some new features such as code optimization for smart contracts, and the release of the desktop wallet Mist, making Ethereum more user-friendly and popular. However, the DAO incident in June 2016 brought huge challenges to Ethereum. The DAO was a decentralized autonomous organization project based on Ethereum, which raised a large amount of ETH through crowdfunding. However, due to vulnerabilities in the smart contract, it was hacked, resulting in tens of millions of dollars worth of ETH being stolen. To address this issue, the Ethereum community decided to undergo a hard fork to retrieve the stolen ETH and return it to investors. This hard fork caused a split in the community, with some supporting the hard fork and continuing development on the new chain, now known as Ethereum (ETH); while others opposed the hard fork, believing that the blockchain should maintain its immutable nature, and they continued mining on the original chain, forming Ethereum Classic (ETC).

In October 2017, Ethereum underwent the ‘Metropolis’ upgrade, which was divided into two phases: Byzantium and Constantinople. The Byzantium upgrade introduced some important improvements, such as code rollback support for smart contracts, compatibility with zero-knowledge proof (ZK-Snarks) algorithm, and postponement of the difficulty bomb, enhancing Ethereum’s security and privacy. The Constantinople upgrade further optimized Ethereum’s performance by reducing the cost of executing smart contracts, delaying the difficulty bomb, improving the efficiency of contract verification, while reducing block rewards from 3ETH per block to 2ETH to control the inflation rate of ETH.

At the end of 2019, Ethereum began to upgrade to version 2.0, marking an important milestone in Ethereum’s development. The goal of Ethereum 2.0 is to address the scalability, performance, and energy consumption issues faced by Ethereum by introducing the Proof of Stake (PoS) consensus mechanism, sharding technology, etc., transforming Ethereum into a more efficient, scalable, and sustainable blockchain platform. On December 1, 2020, the Beacon Chain of Ethereum 2.0 was officially launched, signaling the start of the upgrade process for Ethereum 2.0. The Beacon Chain is a core component of Ethereum 2.0, using the PoS consensus mechanism to manage validators and shard chains, laying the foundation for future upgrades. On September 15, 2022, Ethereum completed The Merge, merging the Ethereum mainnet with the Beacon Chain, officially transitioning from the Proof of Work (PoW) mechanism to the Proof of Stake (PoS) mechanism, marking a significant change in Ethereum’s development. This merge not only significantly reduces Ethereum’s energy consumption but also enhances the network’s security and scalability, paving the way for Ethereum’s future development.

2.2 Ethereum’s Technical Features

2.2.1 Smart Contract

Smart contracts are one of the core innovations of Ethereum. Essentially, they are computer programs that automatically execute contract terms in code deployed on the Ethereum blockchain. The principle of smart contracts is based on the decentralized, tamper-proof, and verifiable nature of blockchain. When predefined conditions are met, smart contracts execute corresponding operations automatically, without the need for third-party intervention, ensuring the fairness and transparency of contract execution.

On Ethereum, smart contracts are written in programming languages such as Solidity. Solidity language is similar to JavaScript, with high readability and usability, making it convenient for developers to develop smart contracts. For example, a simple smart contract can implement the function of transferring digital currency. When the sender initiates a transfer request and meets certain conditions (such as having sufficient balance, entering the correct password, etc.), the smart contract will automatically transfer the corresponding amount of digital currency from the sender’s account to the receiver’s account and record this transaction on the blockchain.

2.2.2 Consensus Mechanism Transition

Ethereum initially adopted the Proof of Work (PoW) consensus mechanism. Under the PoW mechanism, miners compete to solve complex mathematical problems to gain the right to validate transactions and package them into blocks added to the blockchain. Miners who successfully validate transactions will receive a certain amount of ETH as a reward, along with transaction fees. The advantage of the PoW mechanism is its high security and decentralization, as attackers would need a significant amount of computing power to attack the blockchain, which is very difficult in practice.

The transition of Ethereum to the PoS mechanism is a gradual process. In December 2020, the launch of the beacon chain of Ethereum 2.0 marked the introduction of the PoS mechanism to the Ethereum network. The beacon chain, as a core component of Ethereum 2.0, is responsible for managing validators and shard chains, using PoS mechanism to achieve consensus. At this stage, Ethereum is in a mixed state of PoW and PoS, with the original PoW mainnet continuing to operate, while PoS validators on the beacon chain also begin to participate in network validation and management. In September 2022, Ethereum completed the merge, combining the original PoW mainnet with the beacon chain, officially transitioning to the PoS mechanism. This merge is an important milestone in the development of Ethereum, indicating a significant breakthrough and upgrade in Ethereum’s technology, laying a more solid foundation for Ethereum’s future development.

2.3 Ethereum Ecosystem

2.3.1 DeFi Applications

Decentralized finance (DeFi) is one of the most active and important application areas in the Ethereum ecosystem. DeFi aims to build a decentralized, transparent, and trustless financial system through blockchain technology, providing various traditional financial services such as lending, trading, insurance, investment, while eliminating intermediaries, reducing costs, and increasing efficiency and financial inclusiveness.

2.3.2 NFT Market

Non-fungible tokens (NFTs) are unique digital assets based on blockchain technology, each NFT has a unique identifier and attributes, non-interchangeable, contrasting sharply with fungible cryptocurrencies (such as Ether, BTC, etc.). Ethereum dominates the NFT market, with Ether playing a key role in the minting, trading, and other processes of NFTs.

2.3.3 Other Applications

In addition to the DeFi and NFT fields, Ethereum has a wide range of applications in the metaverse, gaming, social, and other areas, further expanding the value and influence of Ethereum.

ETH price historical trend analysis

3.1 Historical Price Data Review

Since the launch of the Ethereum mainnet in 2015, the price of ETH has experienced multiple rounds of significant fluctuations, and its price trend is closely related to the development of blockchain technology, changes in market demand, and macroeconomic environment. In the early stages of its launch, due to the limited application scenarios in the Ethereum ecosystem, the price of ETH was relatively low. When it was launched on July 30, 2015, the price was only $0.31. By the end of 2015, the price slowly rose to $0.97.

In 2016, despite the establishment of the Ethereum Enterprise Alliance (EEA) promoting the use of Ethereum in enterprises, the price of ETH dropped to as low as $0.27 due to the overall downturn in the cryptocurrency market. However, 2017 saw a bull market in the cryptocurrency market, leading to a surge in ETH prices. That year, with the gradual popularization of blockchain technology, the initial coin offering (ICO) frenzy emerged, with many projects raising funds through ICOs based on Ethereum. A large amount of capital flowed into the Ethereum ecosystem, sharply increasing the demand for ETH. The price of ETH rose from less than $10 at the beginning of the year to nearly $1,400 by the end of the year, making it one of the most outstanding cryptocurrencies at the time and consolidating Ethereum’s significant position in the cryptocurrency market.

Entering 2018, the cryptocurrency market bubble burst, entering a bear market, and the price of Ether (ETH) plummeted significantly. Factors such as the large number of failures in ICO projects, tightening market regulations, and shattered investor confidence led to a sharp decline in demand for ETH in the market, with prices dropping to below $80, a decrease of over 90% from the high point in 2017. In the following year, 2019, the market gradually stabilized, and the price of ETH began to slowly recover, fluctuating between $120 and $300. During this period, the Ethereum community focused on technical development and exploring use cases, laying the foundation for future development.

In 2020, with the changes in the global economic situation and the rise of decentralized finance (DeFi) and non-fungible tokens (NFT), Ethereum ushered in new development opportunities. DeFi applications have flourished on Ethereum, attracting a large number of users and funds for various financial applications such as lending, trading, and insurance. The NFT market has also begun to emerge, with increasing demand for the trading of NFT assets such as digital artworks and game props. These factors have collectively driven the demand for ETH, leading to a substantial price surge, soaring to over $600. In 2021, the market’s fervent sentiment further propelled the rise in ETH price, reaching a peak of nearly $4900, setting a new historical high.

However, in 2022, the cryptocurrency market once again entered a bear market, with ETH prices severely impacted. The collapse of companies like Luna and Celsius triggered an industry crisis, market confidence was severely hit, investors began to sell off assets, and ETH prices fell below $900. In 2023, signs of recovery gradually appeared in the market, ETH prices rebounded from the bear market, breaking through $1500. Technical improvements such as Shanghai Upgrade brought enhanced scalability to the Ethereum network, to some extent supporting the price increase.

In 2024, the price trend of Ethereum is still full of fluctuations. At the beginning of the year, influenced by the approval of 11 spot Bitcoin ETFs by the U.S. Securities and Exchange Commission (SEC) and the market’s expectation of the approval of Ethereum ETFs, the price of Ethereum soared all the way, nearly doubling in just over a month. On July 23, the U.S. spot Ethereum ETF went online. Although the trading volume was booming after the launch, it did not achieve a high increase after the launch due to the expectation of issuing Ethereum ETFs already being included in the first half of the year’s price increase. Subsequently, due to the lack of sustainable innovation in the industry to support high prices, the price began to plummet in August, falling for 7 consecutive days from July 30, from a high of 3366 US dollars to a low of 2111 US dollars. After that, it entered a long period of consolidation until the market optimism brought by the expectation of Trump’s presidential election victory, and the price of Ethereum rose again, soaring to a peak of 4170 US dollars.

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Factors affecting the price of Ethereum

5.1 Macroeconomic Factors

5.1.1 Global Economic Situation

Changes in the global economic situation have a significant impact on the price of Ether (ETH). During periods of strong economic growth, investors generally have a higher risk appetite and are more willing to invest in assets with higher risks and potential returns, such as cryptocurrencies. With economic prosperity, the wealth of enterprises and individuals increases, leading to a corresponding growth in investment demand, attracting more capital inflows into the cryptocurrency market, including ETH. For example, during the relatively stable global economic growth phase in 2017-2018, the cryptocurrency market experienced a bull market, and the price of ETH soared. Many investors are optimistic about the development prospects of blockchain technology and Ethereum’s leading position in the field, leading them to invest in ETH, driving its price from less than $10 in early 2017 to nearly $1400 by the end of the year.

5.1.2 Monetary Policy

Monetary policy is one of the important macroeconomic factors affecting the price of ETH, with interest rates and quantitative easing policies directly and indirectly impacting the ETH price.

Changes in interest rates can affect investors’ cost of capital and expected investment returns. When interest rates rise, the investment returns of traditional financial markets increase, such as the returns on fixed-income products like bank deposits and bonds. This makes investors more inclined to allocate funds to traditional financial markets, reducing investments in risk assets like cryptocurrencies. In a high-interest-rate environment, the opportunity cost of holding Ether (ETH) and other cryptocurrencies increases, prompting investors to choose safer and more stable investment options. For example, when the central bank raises interest rates, bond market yields increase, leading investors to sell ETH and switch to buying bonds, causing a decline in ETH prices.

5.2 Cryptocurrency Market Factors

5.2.1 Bitcoin Price Trend

Bitcoin, as the leader in the cryptocurrency market, has a significant impact on the price trend of Ethereum (ETH), and there is a notable correlation between the two. In the cryptocurrency market, Bitcoin is often seen as a benchmark asset, widely recognized by investors as ‘digital gold,’ with attributes of value storage and a safe-haven asset. Due to Bitcoin’s leading position and widespread recognition in the market, its price fluctuations often trigger chain reactions throughout the entire cryptocurrency market.

5.2.2 Market Sentiment and Investor Confidence

Market sentiment and investor confidence are important factors affecting the price of ETH, which manifest as investor fear and greed in the cryptocurrency market, exerting significant influence on ETH price fluctuations.

When the market is optimistic, investors tend to show a greedy attitude, full of confidence in the future price of Ether, believing it has significant upside potential. This optimism prompts investors to buy a large amount of Ether, driving the price continuously higher. In a bull market, investors see Ether prices continuously rising and are often influenced by the profit-making effect, eagerly following the trend to buy in. They fear missing out on investment opportunities and are afraid of missing the market, thus continuously increasing their investment in Ether. This greed can lead to a sharp increase in market demand, while supply remains relatively stable. According to the principle of supply and demand, prices will continue to be pushed higher. For example, during the cryptocurrency bull market in 2017, the market was very optimistic about the prospects of Ether, investors’ greedy sentiment surged, a large amount of capital poured into the Ether market, driving its price to achieve astonishing gains in just one year.

5.3 Ethereum’s own factors

5.3.1 Technical Upgrades and Development

Ethereum’s technological upgrades and developments have a profound impact on the price of ETH. The upgrade to Ethereum 2.0 is an important milestone in Ethereum’s evolution, aiming to solve the scalability, performance, and energy consumption issues that Ethereum currently faces. Ethereum 2.0 introduced a proof-of-stake (PoS) consensus mechanism, replacing the original proof-of-work (PoW) mechanism. The adoption of the PoS mechanism has led to a significant reduction in the energy consumption of the Ethereum network, while improving the speed of transaction processing and the security of the network. This upgrade has made Ethereum more technologically advanced, attracting more developers and users, and having a positive impact on the ETH price.

5.3.2 Project Development and Application Landing

The development and application of projects in the Ethereum ecosystem play an important role in enhancing the price and market position of Ether (ETH). In the decentralized finance (DeFi) sector, many projects are built on Ethereum and have achieved significant development. MakerDAO, as a decentralized lending platform on Ethereum, has achieved the issuance and management of the stablecoin Dai through smart contracts. Users can collateralize assets such as ETH into MakerDAO’s smart contracts and borrow the stablecoin Dai. Dai is pegged to the value of the US dollar, maintaining relative stability, providing users with a way to obtain stable value assets in the cryptocurrency market. The successful development of MakerDAO not only increases the demand for ETH, as users need to stake ETH to obtain Dai, but also enhances the application value of Ethereum in the financial sector, attracting more investors’ attention to Ethereum and ETH, exerting a positive driving force on the price of ETH.

ETH Price Prediction

According to the prediction of the AI large model, the situation of ETH price prediction is as follows:

Image source: Gate.io AI Big Model

Note: The ETH price prediction results are based on AI large model data, for reference only, not constitute investment decisions.

Conclusion

As the world’s second-ranked cryptocurrency, ETH has driven the global blockchain industry’s development and holds an unshakable position in the cryptocurrency industry. Ethereum price prediction involves certain complexity and uncertainty. When investors pay attention to the price trend of Ethereum, they need to consider various factors such as technological development, market supply and demand, macroeconomics, and policies and regulations, combined with their own risk tolerance and investment objectives, to make rational investment decisions.