Ether prices are on the move, and they’re headed north.
The cryptocurrency, which powers the world’s second-largest blockchain, ethereum, has seen its price rise more than 3,000% year-to-date and roughly 180% in the last month, according to data from CoinMarketCap.
Yet, amid this rise, and increase in investor attention, many are wondering how the digital asset’s price will perform going forward. That answer, though, may not be exactly clear.
When polled, crypto market analysts provided mixed opinions. Some asserted that ether could experience significant upside in the future, even going so far as to suggest its market capitalization (market cap) could surpass that of bitcoin, long the market’s progenitor and leader.
Others, however, warned that ether’s price may have become inflated as the broader cryptocurrency space has drawn robust inflows.
Key role of ICOs
One crucial factor affecting ether’s price is the rise of initial coin offerings (ICOs) – sales of blockchain-linked data that allow investors to exchange ether for newly created digital tokens.
Some of these offerings have generated significant visibility by selling millions of dollars-worth of tokens in minutes. As a result, ether’s value is “hugely related” to these offerings, according to Brad Chun, chief investment officer of hedge fund Shuttle Fund Advisor.
Chun told CoinDesk he believes some companies are simply holding the ether tokens raised through these sales, since retaining the digital assets is more profitable than spending them on projects.
By holding ether tokens instead of spending them, these firms could be placing upward pressure on the cryptocurrency’s price, he speculated.
Marius Rupsys, cryptocurrency trader and co-founder of fintech startup InvoicePool, offered similar sentiment. He stated that while most ICOs let investors use bitcoin or ether to purchase digital tokens, some choose ether, a) because they are afraid of missing out and b) its transactions take place more quickly.
“This keeps many ethers locked up in new projects and [fewer] ethers are available for trading,” he explained.
Arthur Hayes, co-founder and CEO of BitMEX, also emphasized how these offerings are affecting ether’s price. “The value of ether is directly related to the value of [ICOs] listed on the [ethereum] protocol,” he told CoinDesk.
Hayes stated that if more highly successful ICOs list on this platform, ether’s price could experience significant gains.
“If we get more instant sell outs like [Brave’s BAT token], the ether price is a bargain at the moment,” he continued.
What the bulls say
Hayes was certainly not the only one to offer a bullish forecast for ether, as some analysts have predicted that the alternative asset protocol will surpass bitcoin, a milestone event they inferred might take place in 2017.
At the time of report, ether’s market cap was roughly $24bn, more than half that of bitcoin’s $45.8bn, CoinMarketCap figures reveal. Bitcoin’s share of the total market cap for all cryptocurrencies has been declining lately, standing at roughly 45% at press time. (This is after hovering above 80% during most of the time for which market data is available.)
While bitcoin was the first cryptocurrency to scale, and has long been the largest in terms of market cap, it could lose this position soon enough, said Tim Enneking, managing director of Crypto Asset Management.
“I think ether will overtake bitcoin, probably before the end of the year,” he stated.
Enneking is not alone in this belief, as Sebastian Limeres, a cryptocurrency advocate and attorney, also predicted that ether’s market cap will surpass that of bitcoin either this year or next.