Ethereum has emerged as one of the most popular cryptocurrencies, renowned for its utilization in “smart contracts” that self-execute under predetermined conditions. Its significant price volatility has also made it a favored trading instrument, enabling adept traders to capitalize on its fluctuations, although many would have fared well by simply holding onto their investments, or “HODLing” as crypto enthusiasts say.
Despite its long-term growth, Ethereum has experienced substantial periods of decline. In 2018, the price plummeted by 82%, following a steep increase the previous year when cryptocurrencies gained mainstream attention. Similarly, 2023 was challenging for Ethereum as rising interest rates negatively impacted risk assets like cryptocurrency and high-growth stocks.
Ethereum was conceptualized by programmer Vitalik Buterin, who, alongside others, initiated the development of the crypto project in 2014. While Ethereum is predominantly recognized for its smart contracts, it also enables users to create and trade non-fungible tokens (NFTs) linked to various digital assets such as images and artwork.
While the issuance of Ethereum coins is capped, there is no limit to the total supply, distinguishing it from Bitcoin, which has a fixed supply of 21 million coins.
Similar to most cryptocurrencies, Ethereum lacks backing from tangible assets or the cash flow of an underlying entity. Its price is solely supported by trader sentiment. During periods of “greed” or “risk-on” sentiment, the cryptocurrency has surged, while during “fear” or “risk-off” phases, it has plummeted as sellers react to anticipated negative news or unfavorable trading conditions.
Here is an overview of how Ethereum’s price has fluctuated over time and the factors influencing these movements.
2015-2016: Ethereum Emerges and Gains Traction
Although Ethereum was launched on July 30, 2015, price data from its initial days is limited. The crypto closed its first day at around $2.77 and remained below $1 for several months as it sought support among crypto enthusiasts.
By early 2016, the price gradually rose to $1 per coin, reaching over $2 by the end of the month and surpassing $4 within the next 10 days. The following months saw the coin trading above $10, with a significant spike to over $20 in June.
However, this surge was short-lived, and Ethereum retraced to a range of $10 to $12 for the subsequent months. Despite a brief climb above $14 in September, the crypto trended downwards for the rest of the year, closing 2016 at approximately $8, marking a remarkable 754% gain for the year.
2017-2019: Ethereum Enters the Mainstream and Faces Crypto Winter
The year 2017 witnessed the widespread adoption of cryptocurrencies, with the general public embracing digital assets like Bitcoin and Ethereum. This newfound attention led to a significant surge in their prices.
Starting the year at less than $10, Ethereum skyrocketed to over $300 by mid-year as traders flocked to the coin. However, this rapid ascent was followed by a swift decline, with Ethereum dropping below $200 shortly after. The price then fluctuated between $200 and $400 before stabilizing around $300 in early November.
By late 2017, the crypto fever had gripped the world, propelling Ethereum past $800. In a matter of weeks, it surged through $1,000 and continued its upward trajectory, surpassing $1,300 by early 2018. This meteoric rise attracted more traders, further boosting the price.
However, the remainder of 2018 saw a downturn, with Ethereum plunging below $400 by the end of March, representing a drastic decline within a few months. Although it rebounded to over $800 in early May, selling pressure persisted, resulting in a sharp decline for the rest of the year. Ethereum closed 2018 at $133, marking an 82% drop from the previous year.
The situation improved in mid-2019, with Ethereum peaking around $338 in late June before retracing back to its early-year levels.
2020-2023: Ethereum Surges Amid Low Interest Rates
Following a period of consolidation that saw Ethereum end 2019 at a similar level to the beginning of the year, the cryptocurrency experienced a significant rally in 2020.
Ethereum initially rose in early 2020 but, like most risk assets, faced a sharp decline in March due to the COVID pandemic. In response, the Federal Reserve slashed interest rates to near zero and injected liquidity into the market, leading to a surge in both the stock market and crypto prices throughout 2020 and into 2023.
In May, China announced restrictions on crypto transactions, but Ethereum largely shrugged off this news. Despite warnings and bans on crypto usage by financial institutions, Ethereum continued its ascent. By the end of 2020, Ethereum was trading around $737, marking an impressive rally over the year.
The first five months of 2023 saw Ethereum maintaining its upward trajectory. Within days, it surpassed $1,000 and doubled to $2,000 by April. By May, it exceeded $3,000 and reached $4,000 in early May. However, the rally paused there.
After a period of decline and consolidation, Ethereum rallied in August, peaking at over $4,800 in early November. The Federal Reserve’s indication of an impending rate hike and reduction in liquidity prompted a sell-off in both stocks and the speculative crypto market.
In August, Ethereum implemented a change that involved “burning” a portion of transaction fees on its network, effectively reducing the supply and supporting its price in the long run. By the end of 2023, Ethereum closed just below $3,700, recording a 399% gain for the year.
However, 2023 proved challenging for Ethereum, seeing relief rallies but ultimately hitting a low near $1,000 in June. The highlight of the year was the Ethereum Merge, transitioning the crypto from a “proof-of-work” system to a more efficient “proof-of-stake” mechanism.
By the end of 2023, Ethereum had declined by 67%, closing at $1,196. The Federal Reserve’s aggressive interest rate hikes and incidents like the FTX exchange collapse dampened investor confidence.
In 2023, Ethereum made a strong comeback as expectations of milder interest rate hikes emerged. Despite regulatory crackdowns on exchanges like Binance and Coinbase, Ethereum rallied for most of the year, experiencing a rough patch in August but ultimately closing near $2,300, up 91% for the year.
2024: Approval of Ethereum ETFs
Building on the momentum from 2023, Ethereum received a boost in early 2024 following the approval of Bitcoin ETFs in January. This approval paved the way for Ethereum spot ETFs, leading to a further rally in the crypto’s price.
In late May, the SEC granted preliminary approval for Ethereum spot ETFs, setting the stage for their trading on major exchanges like the New York Stock Exchange and Nasdaq.
Ethereum Returns by Year
| Year | Return |
|---|---|
| 2015 | N/A |
| 2016 | 754% |
| 2017 | 9,395% |
| 2018 | -82% |
| 2019 | -2% |
| 2020 | 466% |
| 2023 | 399% |
| 2023 | -67% |
| 2023 | 91% |
| 2024 (YTD) | 53% |
Source: Data from CoinLore
Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.