ETH hits a new high again. What’s the next stop after breaking $2,000?

At noon on February 20th, Beijing time, the world's second largest cryptocurrency ETH broke through $2,000 for the first time, which means that ETH has increased by 168% since the beginning of this year, while BTC has increased by about 93% during the same period.

There appear to be at least two reasons for Ethereum’s rise.

First of all, the surge in Bitcoin has attracted a large number of institutions and retail investors to become interested in cryptocurrencies. Since the beginning of this year, as Bitcoin has risen from $32,000 to the current $56,000, only two of the top 50 cryptocurrencies have fallen, while 34 have doubled in price.

Secondly, decentralized finance (DeFi) is booming, most of which runs on the Ethereum blockchain. After several years of exploration, Ethereum seems to have found its killer application through DeFi, which allows people to borrow money, accumulate interest, and exchange assets without going through third-party intermediaries. According to the 70 Ethereum-based DeFi applications tracked by defipulse, the assets locked in the related projects have exceeded $42 billion.

(Data from: qkl123.com)

Regarding ETH’s breakthrough of $2,000, Paul Veradittakit, a partner at crypto asset investment firm Pantera Capital, told Decrypt:

“ETH hitting $2,000 validates that applications around DeFi and NFTs are hitting hockey stick growth, and Ethereum is proving itself to be a leader in creating decentralized applications, all culminating in an institutional-grade asset class.”

In fact, in terms of institutional-grade assets, there are already more and more Ethereum financial instruments available to investors, from the Grayscale Ethereum Trust in the United States to the ETH Fund of the Toronto Stock Exchange 3iQ.

Jordan Spence, chief marketing officer at wallet management tool MyCrypto, commented:

“It’s a combination of factors. The rise in ETH’s price is a culmination of the work that the entire industry has put in over the past few years, and more and more people are beginning to understand and want to participate.”

And $2,000 does not seem to be the end of Ethereum, as Spence pointed out:

“We’ve seen a lot of growth in Ethereum and DeFi, and Ethereum 2.0 is also developing.”

Ethereum 2.0 is a proof-of-stake (PoS) alternative to the current Ethereum network, and its Phase 0 was launched late last year but is not yet fully functional. However, the hope of Ethereum enthusiasts is that it will solve Ethereum's current congestion problems, aiming to allow value to flow more freely on the network and eliminate the need to use competitor blockchains for scale expansion.

As for what will happen next, Spence said:

“The new floor for ETH is probably going to be below $2,000, but I wouldn’t be surprised to see ETH go above that.”