Factors Impacting Ethereum’s Price, According to Richard Durand
The marriage of cryptocurrencies and artificial intelligence would be favorable for Ethereum. Ether ETFs are expected to be launched in the United States next week.
Ethereum’s cryptocurrency, Ether (ETH), is reflecting poor price behavior relative to its peers, which is giving signals about its fate.
According to Richard Durant, who has a degree in finance and is head of the asset management firm Narweena, there are several key factors that have an impact on the price. The most important, in his view, is US monetary policy, as he noted in a detailed analysis.
Interest rates in the economic powerhouse remain at their highest level in 20 years, which, as the specialist details, “continues to drain liquidity from the system”. “This has had a dramatic impact on some assets and equities, although many are unaffected,” he said.
This can be seen in the following chart, which shows the correlation between lower global liquidity and the fall in the price of ether (ETH), measured in bitcoin (BTC).
In his view, ETH is a risky asset that trades in line with other stocks under consideration as well as the Nasdaq stock index. Although, for the specialist, the latter has outperformed in recent months, partly due to the rise of artificial intelligence (AI).
“With recent inflation data pointing to a possible easing of monetary policy, there is a possibility that Ethereum’s performance will strengthen in the future,” he mentioned.
Ethereum Needs to Improve Its Narrative Vis-a-vis Competition
The specialist also points out that Ethereum lacks the digital gold narrative of bitcoin and therefore relies more on demonstrating its use in the real world. As such, he underlines, secondly, as another key factor to the fundamentals of this network.
“Technical progress has been slow and real-world adoption is still limited,” Durant said of the ETH network, which aims to be a hub for decentralized applications. “Ethereum is prioritizing decentralization, and as a result, scalability is still an issue,” he said.
This is partly due to competition from networks that offer cheaper, faster transactions, which leads to the third key point. “Ethereum is competing with many networks, some of which have managed to create compelling narratives at different times,” he pointed out. Therefore, it is crucial for its performance to better position itself.
Fourth, the number of active ETH addresses suggests that the proportion of buyers has increased along with the price in recent months, although it has been quite modest. “Unlike in 2020, price has led demand rather than the other way around, which I think is a bit worrying,” the financial specialist commented.
The number of active addresses is 16% below the all-time high reached in 2021. For Durant, this is due to the lack of a growth engine similar to the hype generated by the development of NFT and DeFi in this cycle. In addition, this sector is driven by networks such as Solana, which offer more profitable transactions.
Warns the analyst that “artificial intelligence and autonomous agents could be an emerging driving wind for Ethereum”. Without going further, Grayscale this week launched an investment fund in niche cryptoassets, as reported by CryptoNews, showing the growing interest in the market.
In this sense, it may be key for Ethereum to emerge as a site that facilitates these developments. However, for Durant, “it’s too early to say how big the impact of AI will be.”
Meanwhile, various entities agree that the cryptocurrency will reach new highs by the end of 2024, with the influence of ETFs.
By Leonardo Perez