About the ETH/USD (Bitcoin/US Dollar)
Ethereum (Ether), the world’s second largest cryptocurrency, has been growing exponentially. The term ETH/USD depicts the value of Ethereum against the US Dollar. Ethereum is created by computers performing highly complex mathematical computations, thereby converting electricity into long strings of code that have monetary value. This computing is done in a distributed network and is called cryptocurrency mining.
The cryptocurrency pair indicates how many US dollars (the quote currency) are needed to purchase one Ethererum (the base currency). For example, if the pair is trading at $140, it means that it takes $140 US dollars to buy 1 Ethereum.
Breaking Down “ETH/USD”
An innovative young lad named Vitalik Buterin, through his ambition to completely transform the internet invented a platform on which developers could build any type of decentralized application.
Having a thorough understanding of Bitcoin, Vitalik suggested that it needed a scripting language for application development. When nobody was interested in his suggestion, he proceeded with his work on this powerful new project.
In 2013, Vitalik published a whitepaper describing this dynamic new platform which he called Ethereum. For his incredible innovation, he was named as the 2014 Thiel Fellow and received a $100,000 award.
After this, the young man dropped out of the University of Waterloo to pursue his Ethereum ambition. With the help of other developers and co-founders, the project quickly went into overdrive.
With a very successful crowd sale in July 2014, they raised more than $18 million by selling Ether, the Ethereum tokens which were basically the shares of the project.
A year later, their first release called Frontier was launched on July 30, 2015. A new platform was now available on which developers could create their own decentralized apps and smart contracts.
Ethereum Market Capitalization
Ether is the second largest cryptocurrency in the world and, at one stage in 2017, it had a market capitalization of almost $38 billion. This interesting financial instrument has grown at an unbelievable pace!
Instruments Correlated to Ethereum
Other prominent cryptocurrencies like Bitcoin (BTC) and Litecoin (LTC) are positively correlated to Ethereum prices. This correlation, however, has varied from time to time.
There have been times when Bitcoin (BTC) has moved in opposite directions to Ether (ETH). Nevertheless, Ether is prone to moving in tandem with its big brother Bitcoin, because Bitcoin generally sets the tone for the cryptocurrency market.
When Bitcoin live price performs well, it sends out a message to the investment community that all is well in the cryptocurrency market. Consequently, Ether and Litecoin tend to benefit from a rosier bitcoin. Ether and Litecoin are some of the largest cryptocurrencies.
Conversely, a Bitcoin crash is likely to weigh on Litecoin and Ether, depending on what caused the crash, of course.
Sometimes other cryptocurrencies can benefit from a weaker Bitcoin. This is usually the exception to the rule, though.
Major Events that Could Impact Bitcoin
Because Ether is still a rather young cryptocurrency, its price is largely affected by events related to its development.
As mentioned earlier, Ether is a value token which is used to pay for transactions and computational services on the Ethereum network. Consequently, the expansion of the Ethereum blockchain and related services will obviously impact the value and the price of Ether.
Aspects Regarding Ethereum System’s Development
Although Ether is the second most established cryptocurrency, it is still very young compared to fiat currencies like the US dollar and the British pound. Because of this, events related to its development and operation have the potential to move its price drastically.
Such events could include ‘hard forks’ which alter the internal structure of how ether operates. Ethereum faces an evolving scaling issue which needs to be addressed, one way or another.
Global Financial Crisis
Something else that could affect the price of Ether considerably is a global financial crisis.
If confidence in major central banks and governments fail, there could be a flight to safety which could boost the appeal of alternative stores of value, of which Ethereum could be an important one.
On 5 December 2013, the People’s Bank of China stepped in and banned financial institutions on the Chinese mainland from dealing in cryptocurrencies.
This intervention by the Chinese government caused a massive selloff, and major cryptocurrencies lost more than 50% of its value in a matter of days.
Since Ether is the second biggest cryptocurrency, it comes as no surprise that it is strongly affected by the Bitcoin price and sentiment. When understanding how to trade Ethereum, one must consider the impact Bitcoin can have on price action.