What Determines The Ethereum Price AUD? A Complete Guide
Ether, the native token of the Ethereum blockchain, is the second largest cryptocurrency by market capitalisation. As of November 2020, Ethereum price AUD is sitting at above $600 per Ether. This marks a 230% increase in price since the beginning of the year, making it even more spectacular than Bitcoin as an investment asset!
HOW DID ETHEREUM PRICE AUD GO TO THE MOON?
The short answer is supply and demand. It is reasonable to assume that the supply of Ether is relatively steady. Therefore by definition, the demand for Ether (ETH) cryptocurrency has increased significantly since its inception.
There are a number of reasons for the increased demand for Ether cryptocurrency. Firstly, cryptocurrencies are gaining more mainstream adoption. As such, the prices of many cryptocurrencies are on a Bitcoin-led bull run. We have previously covered what determines Bitcoin Price AUD in detail.
Secondly, in 2020, the whole Defi frenzy has played a role in the demand for Ethereum. Ether, or variations of Ether, has become highly sought after since the Defi space exploded in mid 2020. For someone who wants to ride the Defi wave, Ether is one of the ideal ‘gateway tokens’.
Thirdly, similar to Bitcoin, Ethereum Price AUD has increased relative to the fiat currency, which is the Australian dollar. This is because, since the COVID19 pandemic, the Reserve Bank of Australia has announced a series of measures. These measures, broadly speaking, involve monetary and fiscal policies that intend to ‘supercharge’ the economy. There is a catch though – this is only possible by increasing the overall supply of Australian dollars in the economy. With this influx of AUD, investment assets, including Ether, will appreciate in value compared to the dollar.
WHAT WILL AFFECT ETHEREUM PRICE IN THE FUTURE?
The factors that will affect Ethereum Price in Australian dollars isn’t that dissimilar to those that will affect Bitcoin Price AUD. However, we want to discuss a few factors that are in additional to the content in our previous blog.
UTILITY OF ETHEREUM
The utility of Ethereum (ETH) will play a major factor on where Ethereum Price AUD will be. Bitcoin is the first cryptocurrency which means it has a natural group of followers. Ether, on the other hand, had to work a lot harder. The Ethereum ecosystem has always relied on its utility and problem-solving capability to bolster its popularity.
Over the past few years, there are more and more use cases for the Ethereum blockchain. This is evident from the number of projects there are that are based on the Ethereum chain. If this trend continues, it is not hard to see that the price of Ethereum will continue to head in the positive direction.
COMPETITIVENESS OF ETHER VS OTHER CRYPTOCURRENCY
The price of Ether cryptocurrency is proportionate to the number of people and capital that flocks to its ecosystem. It is therefore very important for Ether to stay competitive relative to other cryptocurrencies.
As the total market capitalisation for cryptocurrencies increase, so do the number of cryptocurrencies out there. Many of these cryptocurrencies, such as Tron, claim to do bigger and better things than the rest.
With only so much capital that will flow into cryptocurrencies, and with the Bitcoin dominance at more than 60% as at the time of writing, the ‘alt-coins’ are in hot competition with one another for mass adoption. Ethereum is no different in this regard.
SUSTAINED BITCOIN BULL
A strong Bitcoin is always good for cryptocurrencies in general, and this is no different for Ethereum. As mainstream investors such as Grayscale continue their investments in Bitcoin, there will be a ‘flow-on’ effect to other coins. Simply put, as Bitcoin prices go up, the market confidence and risk appetite in cryptocurrency will also go up. Earlier investors in Bitcoin can take profit and reinvest some of the profits into alt-coins they believe in. As Ether is the biggest alt-coin by a margin, this will naturally increase its demand.
Further, given the market capitalisation of Ether is much smaller than that of Bitcoin, this ‘flow-on’ effect is more profound than many think. However, the opposite is also true. During the 2018 ‘crypto winter’, many observed that alt-coins suffered larger percentage losses compared to Bitcoin.
So remember, when investing in Ether, it is a high-risk-high-reward venture. Even more so than Bitcoin!
USD / AUD EXCHANGE RATE
A much-overlooked factor is the USD/AUD exchange rate. Typically, the weaker the Australian dollar is against the USD, the better it is for Ethereum Price AUD. This is because, like many other assets, such as gold and Bitcoin, Ether is still predominantly traded in USD. As such, when AUD weakens against the USD, Ethereum Price AUD will go up.
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