The value of Ether, the name of the natural cryptocurrency on the Ethereum blockchain, more than doubled in 2021, outperforming Bitcoin, which rose to record levels in the first months of the year. The reason behind the increase in the value of cryptocurrencies is thought to be the low liquidity across crypto exchanges.
Most investors are thought to take direct responsibility for their own money or transfer it to decentralized finance protocols rather than exchanges. If there is more Ether in hot or cold crypto wallets than in the stock market, it may have decreased liquidity on the sell side and caused prices to increase.
Another potential reason behind the appreciation of Ether could be the Chicago Mercantile Exchange announcing that it will allow trading of Ethereum futures contracts, thereby giving the cryptocurrency more validity.
Although cryptocurrencies have some problems, they now have a solid place in the money markets. This in turn gives cryptocurrency miners confidence in their assets, which increases valuations. Whatever the reason behind the price spikes, it's sure to be good for Ether and Bitcoin holders. While the value of Ether has more than doubled this year, Bitcoin has experienced a 58% increase in value.
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