The factors affecting the price of Ethereum are divided into two categories of fundamental and technical. Continuous technical updates and the expansion of Ethereum’s ecosystem, along with strategic collaborations with major companies, have attracted capital to this cryptocurrency.
Additionally, increased trading volume, improved network security, and the scalability development of the Ethereum network will lead to long-term price growth and are among the factors influencing Ether's price.
Fundamental Factors Impacting Ethereum Price
Several factors, including the increase in staked Ethereum and external fundamental drivers, influence the price of Ethereum. Fundamental factors affecting the price of Ethereum include:
- Network upgrades and token burns
- Development of Layer 2 technologies
- Improved network security
- Ecosystem expansion and strategic collaborations
- Global economic conditions
- News and events
Network Upgrades
With new upgrades to the Ethereum network, the transaction fee structure has changed, increasing the appeal for users.
Additionally, by burning a portion of Ethereum during upgrades, the inflation rate of circulating ETH decreases, resulting in a reduced supply and increased price.
In some cases, the amount of ETH burned exceeds its issuance rate, which can drive its price higher in the long term.
Development of Ethereum Layer 2 Technologies
To improve the scalability of the Ethereum network, Layer 2 solutions such as Arbitrum and Starknet have been developed, enhancing network speed and accelerating growth in decentralized finance (DeFi) and non-fungible tokens (NFTs).
Improved Network Security
Regular updates focused on enhancing Ethereum’s security boost user confidence and attract investors. Reducing the risk of hacking and network breaches lowers the price volatility caused by adverse security events.
Ecosystem Expansion and Strategic Collaborations
Ethereum’s partnerships with major companies such as Microsoft and JPMorgan have enhanced its credibility. Additionally, expanding integrations and use cases increase the factors impacting the Ethereum price.
Global Economic Conditions
The state of the global economy is one of the factors influencing Ether's price in the crypto market.
When the global economy is strong, demand for riskier investments tends to increase. In this context, Ethereum is seen as a trustworthy and attractive investment option in the crypto market.
News and Events
Global economic, political, and social events also influence Ethereum’s price. Additionally, Ethereum-related news, broader cryptocurrency news, and security events, such as network hacks, can significantly affect Ethereum’s price.
Technical Factors Affecting Ethereum Price
Given the activity of retail traders and market makers in the crypto space, chart patterns and technical analysis concepts also impact Ethereum’s price fluctuations. Key technical factors affecting Ethereum price include:
- Trading volume
- Support and resistance levels
- Chart patterns
Trading Volume
Trading volume indicates the strength of price trends and the number of active traders. An increase in Ethereum’s trading volume contributes to its long-term price growth.
Conversely, a decline in trading volume and trader interest can lead to price corrections and drops.
Support and Resistance Levels
Support and resistance levels are key decision points for traders to determine when to buy or sell Ethereum. These points help determine entry and exit opportunities in the market.
Chart Patterns
Price patterns such as flags, Candlestick patterns, divergence formations, and more serve as technical indicators for Ethereum investors.
Ethereum’s Price Correlation with Bitcoin
Ethereum and Bitcoin have a close price correlation. However, this does not mean Ethereum always follows Bitcoin’s movements; it may outperform or underperform at times.
Historical data often reflects this correlation: when Bitcoin has reached price peaks, Ethereum has exhibited similar behavior.
Impact of Ethereum Spot ETF Launch on Price
With the approval of Ethereum spot ETFs by the U.S. Securities and Exchange Commission (SEC), a legal investment channel has opened for large investors such as Grayscale, BlackRock, and other financial institutions.
Following the influx of institutional capital and high liquidity, Ethereum’s price volatility has decreased significantly.
Conclusion
Short-term and long-term fundamental and technical indicators are among the factors affecting the price of Ethereum.
These factors include the impact of news and events, network upgrades, infrastructure development, chart patterns, and more, which can have both immediate and long-term effects on Ethereum’s price.
