Ethereum (ETH) has been one of the most profitable cryptocurrencies during 2020, rising from a low near $100 in the middle of March to $400 currently, which is a rally of 300%. This corresponds to a staggering increase in market cap from under $12 billion to over $44 billion, solidifying Ethereum’s (ETH) #2 rank on CoinMarketCap. Indeed, 3rd place, which is Ripple (XRP), has a market cap that is $31 billion less than Ethereum (ETH).
The main factor driving this Ethereum (ETH) rally is the yield farming frenzy. It started when Decentralized Finance (DeFi) platform Compound launched a native token, and users could earn the token by borrowing or lending. This led to a massive influx of funds into Compound as users scrambled to earn as much as possible, and soon other DeFi platforms followed Compound’s lead and launched their own yield farming mechanisms.
Essentially, lots of money can be earned on DeFi platforms in recent months due to yield farming, and people are buying up lots of crypto in order to capitalize on this. Ethereum (ETH) is being bought up the most since the major DeFi platforms are on the Ethereum (ETH) blockchain, and the primary currency they use is Ethereum (ETH).
Another factor may be the anticipated launch of Ethereum 2.0, where Ethereum (ETH) will transition to Proof of Stake (PoS). Basically, some speculators are buying up Ethereum (ETH) now in order to be ready to stake coins when Ethereum 2.0 finally launches. However, there is no set launch date yet for Ethereum 2.0, so this is perhaps not a major factor.
Yet another factor is that Ethereum (ETH) has been rallying so strongly and consistently that investors are buying up Ethereum (ETH) in anticipation that it will continue to rise.
Zooming out, it seems Ethereum’s (ETH) rally may just be getting started since there is no end in sight to the yield farming frenzy, but that being said it is difficult to pinpoint just how high it will go. Notably, Ethereum (ETH) still has a long way to go until it rises back to its all-time high of over $1,400.