Ethereum Just Surpassed $500 For First Time Since 2018—Key Reasons Why

The price of Ethereum (ETH) hit $500 on Binance for the first time since July 2018. The timing of the ETH rally is noteworthy because it comes merely two days after it dropped to $456.

Within two days, from its lowest point on November 18, ETH has rallied by nearly 10%.

Several key reasons appear to be buying the sentiment around Ethereum. The main two reasons are likely the resurgence of decentralized finance (DeFi) and the imminence of ETH 2.0.

ethereum
The 4-hour price chart of Ethereum. Source: ETHUSD on TradingView.com

DeFi Recovery and ETH 2.0 Fuel Ethereum Rally

In the past week, major DeFi tokens in the likes of Yearn.finance (YFI) and Aave posted large gains against both ETH and the U.S. dollar.

Following a capitulation-esqe drop, the recovery of DeFi tokens likely boosted the market sentiment around Ethereum and the altcoin market, in general.

Atop the rebound of DeFi tokens, the impending ETH 2.0 mainnet release has investors optimistic around Ethereum.

Especially as Ethereum heads towards the deadline of the eth2 deposit contract by the month’s end, the supply of ETH on exchanges would likely drop.

When the circulating supply of ETH on exchanges continuously declines, the sell-side pressure on the cryptocurrency could also drop in tandem.

Investors are Uncertain Whether to Choose Bitcoin, Ethereum, or DeFi

Based on the recent trend of the market, investors are seemingly bracing for a prolonged bull market heading into the year’s end.

According to Spencer Noon, the head of DTCCapital, investors are uncertain whether to choose between Bitcoin, Ethereum, or DeFi. He wrote:

“Behind the scenes, very few investors I’ve talked to have conviction about whether $BTC, $ETH, or #DeFi tokens outperform this bull market. I don’t blame them for having 1/3 exposure to each, which seems reasonable given the uncertainty.”

This uncertainty could benefit Ethereum as Bitcoin has rallied significantly in recent months. It is already nearing $20,000, and some may think that its upside potential is limited until it passes $20,000.

If Bitcoin achieves a new all-time high, it would enter price discovery, which would lead to a new peak for the dominant cryptocurrency.

Until BTC reaches a new record high, the probability that the appetite for DeFi and ETH would strengthen remains high.


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