Ethereum vs. USD – Cryptocurrencies

Instrument description

Ethereum has been a dominant force in the cryptocurrency market and right behind Bitcoin when it comes to market capitalization. Bitcoin is a top-ranked digital currency as it was a pioneer in offering peer to peer transactions and was launched in 2009 while Ethereum went live in 2015. Ethereum also works on blockchain technology and offers smart contracts where users can develop their own digital assets and decentralized applications (DApps).

Ethereum is an open-source, decentralized digital currency that was developed based on a whitepaper by Vitalik Buterin in 2013. Ether is the name of the currency used on the Ethereum platform and referred to as ‘utility currency’ and ‘crypto-fuel.’ Ethereum is known for its robust security, fast transaction speeds, and programmable ability as compared to Bitcoin. The transactions in Ethereum take seconds while it takes minutes in Blockchain.

The Ethereum blockchain network and smart contracts function due to the interconnection of ‘nodes’ that act like computers and servers that allow the transaction, represent ownership and digitize other financial applications without the need of any intermediary or third party. Ether is referred to as ‘gas’ or fuel that drives the network and transactions. Bitcoins are capped at 21 million while there is no limit to the mining of Ethereum coins.

In March 2017, many blockchain startups, developers, researchers, and Fortune 500 companies sat together to announce the Enterprise Ethereum Alliance (EEA) that will not only increase the pace of Ethereum adoption in global countries but also work on further improvements in the Ethereum blockchain network. Ethereum was released later to Bitcoin but seen as more advanced and developed, and offering less transaction fee as compared to Bitcoin.

What is the ETH/USD currency pair?

The Ethereum (ETH) pairing with the United States Dollar (USD) is given by ‘ETH/USD’ where ETH is the base currency, while USD is the quote currency. The ETH/USD matching shows a combination of ETH, which is a widely acclaimed cryptocurrency, and US Dollars, which is the most popular fiat currency in the world. The crypto side, ETH, offers volatility while USD is the most liquid and most dominant currency.

Traders residing in the US tend to trade ETH with USD as they know the price volatility of the Ethereum and the corresponding stability and liquidity of US Dollars as compared to any other fiat currencies.

The ETH/USD pair attracts day traders due to its volatility and liquidity. The average daily of USD is said to be 0.6%, while the average volatility of ETH ranges from 5% to 10%. The daily price changes in ETH/USD allow traders to have the possibility to potentially profit, but it comes with a certain risk if the price movement is not in the direction as predicted.

The ETH/USD specifies the relationship of Ethereum with the US Dollar. The ETH/USD pair shows how many US Dollars are required to buy one Ether. The current exchange rate is 1 ETH = $384.17

History of ETH/USD Pair

Ethereum was introduced IN 2013 as a whitepaper by Russian/Canadian developer and programmer Vitalik Buterin. The Ethereum project was crowdfunded and raised nearly $18 million. Ethereum is based on the ‘smart contracts’ model that allowed users to not only introduce their own digital assets but develop advanced decentralized applications (DApps). Ethereum went public on July 30, 2015, and by the end of the year, its value was touching $1.

In May 2016, Decentralized Autonomous Organization (DAO) was formed as a venture fund to raise investment. Almost $150 million was collected, but later in June, nearly $50 million was stolen, which raised doubts on the security of the Ethereum platform. The community of Ethereum developers decided to perform a division or ‘hard fork’ in the original Ethereum code to retrieve the lost $50 million. The split or ‘hard fork’ was done on July 20, 2016, and led to two versions of Ethereum.

The older version was called ‘Ethereum Classic’ while the new version adopted ‘Ethereum,’ which had already become popular in the cryptocurrency market and denoted the immutability and fungibility of Ether. The value of Ethereum reached an all-time high value of $1,432 in mid of January 2018. The current market capitalization of ETH/USD is estimated $44 billion, and the circulating supply is 112.65 million.

US Dollar is the official currency of the United States of America. US Dollar is the most financially stable and prominent currency and not only accounts for nearly 90% of all Forex transactions but makes up 60% of all central bank reserves. The average trading volume in the Forex market that includes USD, is valued at almost $5 trillion. US Dollar is paired with all the major and minor global currencies and also with the popular cryptocurrencies such as Bitcoin, Ethereum, Ripple, and Litecoin. USD is also the benchmark currency when it comes to valuing different commodities such as Crude Oil, Gold, Silver, Coffee, Wheat, Cotton, and Rice.

How to analyze the ETH/USD Price Chart

If we go through the price chart of the ETH/USD pair, we observe that the pair traded in the range of $200.00 to $300.00 from the second week of February 2020 to the second week of March 2020. The value of ETH/USD fell to the lowest value of $110.61 on March 16, 2020, but started to rise and trade positively from the last week of April 2020. In the last few months, the value of ETH/USD is trading from $240.00 to $480.00 from the last week of July 2020 to the third week of September 2020. The highest value of ETH/USD was $477.05 on September 1, 2020.

Currently, ETH/USD pair trades on $381.33. The Bid price is 381.42, while the Ask price is 382.81.

If you speculate that the price of ETH will gain as compared to the USD, then you will go long or Buy, and similarly, if you guess the price of ETH will decline against the USD, then you will go short or Sell.

What causes price change in the ETH/USD pair?

The trend of trading ETH/USD is increasing as it offers the best alternative to traditional Forex trading. The high volatile nature of Ethereum is what attracts short term traders who can speculate price movements and try to profit in short period of time. But the traders need to keep a close eye on the historical and current value of ETH and USD and what factors derive the change in value.

As cryptocurrency is open source and not governed by any specific country or bank, the macroeconomic factors do not affect the value of Ethereum. However, there are certain key factors that the traders should look out for, such as

• The popularity and price of competing cryptocurrencies such as Bitcoin, Ripple, and Litecoin
• The regulatory laws, market sentiment, and adoption of Ethereum
• The increase in demand for smart contracts that are hosted on the Ethereum platform

The USD value is impacted by the monetary policy and economic reports released by Federal Reserve (Fed), particularly concerning the interest rate, inflation, employment rate, Gross Domestic Product (GDP), and trade relations. The USD value is also influenced by domestic and international political news and events. The ETH/USD pair can be used to diversify an investment portfolio and try to take advantage of the developing cryptocurrency market.

The information above is for education purposes only and cannot be considered as investment advice. Past performance is not reliable indicator of future results.