The price of Ether — the native cryptocurrency of the Ethereum blockchain — crossed the US$4,000 mark for the first time today, surging to new all-time highs, according to CoinGecko data. Ether is trading at US$4,132.40 as of publishing time.

The second largest cryptocurrency by market value, Ethereum’s Ether started 2021 at just US$738 and is now up over 400%, compared to about 100% for Bitcoin. Ether’s total market value of US$472.8 billion has now surpassed Walmart, Mastercard and PayPal. 

With its massive growth this year, Ethereum’s dominance — its proportion of the total cryptocurrency market value — now stands at over 18%, compared to Bitcoin’s 42%. 

What’s driving Ethereum’s price rise?

“Ethereum is not an altcoin. It is ‘the Ethereum,’ the pioneer of programmable blockchains and the enabler of all popular projects including DeFi and NFTs,” Toya Zhang, chief operating officer at AAX, told Forkast.News. “If we see the price appreciation of Bitcoin as the signal of cryptocurrency being favored as an investable asset, Ethereum’s price spike should be the signal of blockchain-based applications being acknowledged and adopted.”

“As the cryptocurrency market grows as a whole, it is not easy to predict ETH price as itself,” Zhang added. “However, ETH has the potential to talk over 25-30% of the total crypto market capitalization as the market matures (it is 18.46% at the moment).”

See related article: Ethereum prices soar over $3,200, making Vitalik Buterin a billionaire

Increasing institutional adoption

Ethereum’s price surge comes amid increasing institutional adoption of its cryptocurrency. “Another evidence that U.S. (institutional) investors are buying $ETH at @Coinbase. $ETH Coinbase premium has been significantly increased since early 2021,” tweeted Ki Young Ju, CEO of crypto data firm CryptoQuant. “New money is flowing into the crypto market.”

Last week, asset manager VanEck submitted an application to launch the VanEck Ethereum Trust, an exchange-traded fund (ETF) tracking Ether’s price performance, according to an SEC filing. If approved, this would be the first Ethereum ETF in the U.S. 

Institutional interest in Ethereum has also been growing outside the United States. In April, the European Investment Bank issued a two-year EUR 100 million digital bond — its first ever — on the Ethereum blockchain, in collaboration with Goldman Sachs, Santander and Societe Generale. The payment transactions from the underwriters to the EIB were represented on the Ethereum blockchain in the form of Central Bank Digital Currency (CBDC), in a partnership with Banque de France. Also last month, Canada approved several Ethereum ETFs.

Many governments around the world are now exploring CBDC initiatives and ConsenSys, a blockchain software company for Ethereum, has been working with governments in France, Hong Kong, Thailand, and Australia on their CBDC pilots.

Even insurance and derivatives on Ethereum said to be growing

Multiple factors are driving Ethereum’s price rise, from institutional adoption to decentralized finance (DeFi) and non-fungible tokens (NFTs)

DeFi’s growth remains unabated with more than US$149 billion in Total Value Locked, according to DeFi Llama. “Most of the action seems to be running on Ethereum, with at least US$70b in its decentralized apps,” Justin Chuh, senior trader at digital asset investment manager Wave Financial, wrote in an email last week. “Even other sectors like insurance and derivatives are growing.  The non-fungible token movement continues to gain popularity, and whether any of those are valuable or not, ETH is needed to move them.”

Ben Zhou, co-founder and chief executive officer of Bybit, a crypto derivatives exchange, told Forkast.News that “ETH is somehow finding stars aligning for it at the moment: Gas price worries have largely subsided following the Berlin upgrade, the upcoming EIP-1559 (London) promises further gas cost reduction and a deflationary monetary policy, and the European Investment Bank is issuing bonds on Ethereum.” 

See related article: Report: 1.7 million DeFi users now on Ethereum, 50% more since Jan. 1

For now, Ethereum’s momentum appears to be unstoppable as it transitions from a “proof-of-work” to a “proof-of-stake” blockchain. Since the Ethereum 2.0 Beacon Chain launch in December, more than US$18 billion has been staked in the Eth2 deposit contract, according to Etherscan data. Ethereum’s next major upgrade — London — is scheduled to take place around July 14.

“ETH’s price breaking ATHs on a nearly daily basis is perhaps also caused by investors factoring in some of the lofty promises of ETH2 as the network moves towards the direction of proof of stake, not to mention the continued strong growth of DeFi,” Zhou said.

See related article: Ethereum’s Berlin upgrade goes live. What’s next for Ethereum?