Breaking new all-time highs, the recent price action of Ether (ETH) took the crypto market by storm and signaled an official start to alt season. Several analysts are predicting that Ether will surpass its previous all-time high of $2,130 and continue to outperform Bitcoin in the foreseeable future.
Price predictions aside, Ethereum is undeniably leading the charge in crypto, being home to flagship decentralized finance and nonfungible token projects. However, this move comes at a time when the network is at a major crossroads.
Although many layer-one projects have been labeled as “Ethereum killers” over the years, Ethereum is only now facing real competition, which has come mostly from its scalability and congestion issues. If no solution is able to effectively scale the network, Ethereum may soon enough start losing ground to rival smart contract platforms.
Still, Ether is the undeniable king of altcoins, second only to Bitcoin (BTC) in terms of market capitalization. So, what factors are driving up the price of ETH, and is the competitive landscape shaping up to be a real threat to Ethereum’s dominance?
NFTs go viral
There is substance behind the hype, as there are increasing volumes for NFT sales and auctions as well as use cases being applied, especially in the gaming industry and art world. However, digital artists are not the only ones capitalizing on the trend and exploring the technology.
From celebrities like Logan Paul and Snoop Dogg to major sports powerhouses like Formula One and the NBA — and now even movie studios like Warner Bros. — all sorts of people and companies are using NFTs as a way to promote themselves and create alternative revenue streams.
When asked how NFTs are affecting the Ethereum ecosystem and Ether’s price, Suz Lee, chief marketing officer of Blind Boxes — an NFT platform for digital artwork — told Cointelegraph: “As wider adoption takes place across major consumer sectors, NFTs have catalyzed the market momentum of Ethereum since December and will continue to affect its price based on considerable interest in its real life applications and the degree of utility at which it can scale.”
NFTs are not just unique — they offer content creators verifiable ownership of their work and a fairer share of profits by cutting out middlemen. But despite their strong potential to disrupt various industries, NFTs are probably not the main driving force behind Ether’s recent move. Unbeknown to many in the crypto community, the prices of NFT collectibles have actually suffered a silent crash.
The Fed, interest rates and DeFi
While the NFT craze seems to be slowing down, DeFi, on the contrary, is once again breaking records. Due to the Ether price surge, the total value locked in DeFi protocols is now over $61 billion. Substantial gains are also observable in the number of transactions and in the valuation of DeFi tokens.
Just like Bitcoin is serving as a gateway for institutional investors to enter the crypto market, Ether is giving those same investors the opportunity to experiment with DeFi. Multiple venture capitalist firms and groups, such as the DeFi Alliance (formally the Chicago DeFi Alliance), have already made audacious investments in the DeFi industry.
The number of institutional investors flocking to DeFi is only expected to grow, helping bring liquidity, reduced volatility and increased credibility to the industry. Many DeFi projects are already developing solutions catered to institutional investors, offering risk management tools and other institutional-grade services — similar to traditional finance — in order for these companies to be able to hedge their positions and minimize risk.
Justin Wright, chief operating and financial officer of investment platform Yield App, told Cointelegraph: “The days of a real return on cash are long gone,” especially given the recent announcement by the United States Federal Reserve that it will not be hiking interest rates….