Do you wonder why ether (ETH) seems to bounce around in price like a caffeinated kangaroo?

What factors affect ETH’s price?

Ultimately, ether’s price boils down to supply and demand.

  • If the supply of ETH decreases or demand for ETH increases, its price will rise.
  • If the supply of ETH increases or demand for ETH decreases, its price will fall.

So what factors influence ETH’s supply and demand?

Great question!

If you’re wondering why ETH prices sometimes shoot to the moon and other times drop faster than your phone in the toilet, you’re not alone!

Since 2015, ether has become a big deal in the crypto world , not just as a cryptocurrency, but as a whole platform where people build apps, financial products (DeFi), and those digital collectibles everyone was obsessed with (NFTs).

Ether’s supply and demand are affected by multiple factors including specific factors particular to Ethereum itself and more general factors ranging from the crypto market to overall global financial market conditions.

In this lesson, I share what kind of news headlines and other information can influence people to buy or sell ETH.

What Are The Key Factors That Make Ether’s Price Move?

Ethereum’s price is like a soup with many ingredients – technological updates, market trends, government rules, and economic conditions all stirring the pot. People’s FOMO (fear of missing out) and speculation add extra spice to the mix.

History shows us how certain events caused major price swings:

  • The DeFi boom (2020-2021): When decentralized finance apps exploded in popularity, ETH prices surged as people needed it to use these apps
  • The NFT craze (2021): When digital art collecting went mainstream, ETH was often the currency of choice
  • The Merge (September 2022): When Ethereum switched to a more energy-efficient system, investor confidence got a big boost

Beyond these highlight moments, ongoing tech improvements (like the upcoming Pectra upgrade), what Bitcoin is doing, new regulations, and the general economy all influence ETH prices.

On-chain data (the actual activity happening on the Ethereum network) can offer clues about future price movements.

High transaction volume usually signals increased demand, while lots of staking (locking up ETH to help secure the network) can reduce available supply and potentially push prices up.

Recent observations show mixed signals – transaction fees hitting all-time lows (possibly a warning sign), excitement building around the Pectra upgrade, and major financial players like Fidelity getting involved in Ethereum products.

Day-to-day price movements often follow market sentiment, technical analysis patterns, and immediate news.

How Do Protocol Upgrades Affect Ether’s Price?

Think of Ethereum as software that gets regular updates, just like your phone. These updates (called protocol upgrades) aim to make the network faster, more secure, and more capable – and they often affect ETH’s price.

Ethereum has evolved through several phases, with major upgrades like:

  • The London Hard Fork (August 2021): Changed how transaction fees work by “burning” (destroying) a portion of them, reducing the overall ETH supply and helping push prices up
  • The Merge (September 2022): Ethereum’s switch to a more environmentally friendly system called “Proof of Stake” (PoS), which significantly boosted investor confidence

Looking ahead, the Pectra upgrade (expected April/May 2025) is generating buzz. This upgrade will:

  • Allow validators to stake larger amounts of ETH (up to 2,048 ETH)
  • Improve wallet security and features
  • Enhance overall transaction speed

The first phase will focus on staking and wallet improvements, with a second phase (Fusaka) coming in 2026 for further performance upgrades. The successful test deployment in March 2025 has already created some positive price momentum.

History shows that major upgrades usually benefit ETH’s price in the long run, even if short-term price reactions can be unpredictable. For example:

  • The Berlin upgrade (April 2021) had a moderate positive impact.
  • The Altair upgrade (October 2021) caused initial price fluctuations but then a bullish trend.
  • The Shanghai upgrade (April 2023) saw prices rise before the upgrade, followed by a brief increase afterward.

How Closely Does Ether Follow Bitcoin’s Price Movements?

Ether  and Bitcoin are like siblings – they don’t always get along, but they definitely influence each other.

For years, when Bitcoin’s price moved, Ethereum usually followed along – sometimes even with more dramatic swings.

The relationship has been exceptionally strong, with data up to July 2023 showing a correlation of around +0.85 (on a scale where +1.0 means they move in perfect sync).

Ether typically shows a higher “beta” compared to Bitcoin . This is fancy talk for saying when Bitcoin gains 10%, ETH might gain 15%, but when BTC falls 10%, ETH might fall 15%.

However, recent data suggests this relationship might be changing. This could mean ETH is developing its own identity in the market, with investors appreciating its unique utility rather than just seeing it as “Bitcoin’s little brother.”

The ETH/BTC ratio (essentially how many bitcoins you could buy with one ether) is an important metric many traders watch.

This ratio seems influenced by technology stocks and the strength of the U.S. dollar. When tech stocks do well, ETH often outperforms BTC, suggesting investors see ETH as more of a tech investment than a pure currency.

How Do Government Regulations Impact ETH’s Price?

Government regulations can make crypto investors feel like they’re riding a regulatory rollercoaster – one day you’re climbing up with excitement, the next you’re plummeting with fear.

These rules significantly affect Ethereum’s price in several ways:

Stricter regulations (like limits on trading) can hurt ETH’s price by reducing market activity. On the flip side, clear, positive regulations can boost investor confidence and potentially drive prices up.

The regulation of specific Ethereum features, like staking and smart contracts, can also impact how people use the network and affect its long-term price.

A major regulatory question has been whether Ethereum should be classified as a security (like stocks) or a commodity (like gold). This distinction matters because securities face much stricter regulations. In the U.S. alone, different agencies have different views:

  • SEC (Securities and Exchange Commission): Tends to view cryptocurrencies as securities
  • CFTC (Commodity Futures Trading Commission): Argues they’re commodities
  • IRS (Internal Revenue Service): Classifies digital assets as property for tax purposes

This regulatory confusion creates uncertainty that can spook investors.

A significant positive development was the SEC’s approval of spot ether ETFs (Exchange-Traded Funds) in May 2024.

These ETFs make it easier for traditional investors to get exposure to ETH without having to deal with crypto wallets and exchanges – potentially bringing new money into the ecosystem.

For crypto businesses, navigating regulations like the EU’s Markets in Crypto-Assets (MiCA) framework and anti-money laundering rules is crucial for building trust and attracting institutional investment.

The potential downsides of regulation include limited market access, stifled innovation, and higher operational costs.

How Do Global Economic Factors Affect Ether?

Believe it or not, what happens in the regular economy has a huge impact on ETH too! Think of crypto as the rebellious teenager of the financial world – trying to be independent but still living under the same economic roof as traditional assets.

Ether is a tradable asset and just like any other tradable asset, high levels of broad market fear and greed can make traders forget Ethereum-specific headlines in a heartbeat.

Broad market sentiment is often influenced by changes in monetary and fiscal policies, geopolitical events, and shifts in economic performance.

Top-tier headlines from those areas of the market can come almost on a daily or weekly basis, raising the odds of short-term moves in all assets, including crypto.

If you’re not familiar with fundamental analysis, you can visit our lessons on Fundamental Analysis in the School of Pipsology to get started in building those skills.

Fortunately, you don’t have to become a seasoned macroeconomist or geopolitical analyst to understand how these factors may influence ether price action.

There are only a couple of macroeconomic factors that tend to generate broad financial market moves big enough to influence crypto.

Changes to monetary policy tend to be the biggest market movers as interest rate dynamics strongly influence financial asset prices.

And when it comes to monetary policy, inflation and economic growth data tend to be the biggest inputs into monetary policy/interest rate speculation.

Be on the lookout for news releases regarding inflation (CPI and PPI), manufacturing, employment, GDP, and business and consumer sentiment surveys.

Now, every fundamental scenario should be analyzed on its own, but a great starting point and the general rule of thumb are:

  • When growth and inflation are high, the markets tend to speculate that central banks will likely raise interest rates to slow down a hot economy. This tends to spark a move away from risk assets like equities and crypto.
  • When growth and inflation are low, the markets tend to speculate that central banks will likely lower interest rates to ignite a slow economy. This tends to push capital towards “risk-on” assets like equities and crypto.
  • In scenarios where growth is high vs. low inflation rates or growth is low vs. high inflation, traders tend to focus on inflation since a primary mandate for central banks is price stability. If inflation is high, markets will more likely price in higher odds of a rate hike, and vice versa.

Obviously, there’s much more to learn about global macro analysis, but starting with a focus on monetary policy, inflation, and job growth is a great place to get your daily practice going.

How Does Staking Affect ETH’s Price And Supply?

When Ethereum switched to Proof of Stake in 2022 (The Merge), it fundamentally changed how new ETH enters circulation and how the network is secured.

Think of staking like putting your money in a savings account that helps run the Ethereum network – you lock up your ETH, earn rewards, and help process transactions.

This staking system has massive implications for Ethereum’s price because it affects the available supply. When ETH is staked, it’s temporarily removed from circulation – creating scarcity that could drive up prices (assuming demand stays the same or increases).

The numbers are impressive:

  • Over $111 billion worth of ETH is currently staked (as of 2024)
  • This represents more than 34.7 million ETH locked up
  • Stakers earn around 3.6% annual yield (though this has ranged from 3% to 8% depending on network conditions)

This high participation in staking shows strong investor confidence in Ethereum’s future.

The Merge also dramatically reduced the creation of new ETH – by approximately 87% compared to the previous system.

Additionally, a portion of transaction fees is now “burned” (permanently removed from circulation) due to a mechanism called EIP-1559. When network activity is high, more ETH can be burned than created, potentially making the total supply deflationary over time.

Validator rewards are currently calculated based on an “effective balance” capped at 32 ETH, which influences how rewards are distributed.

The potential inclusion of staking in Ethereum ETFs could further impact supply and demand dynamics by increasing demand and reducing available supply.

What Are Some Practical Tips For ETH Investors?

Based on our analysis, here are some updated tips for anyone interested in Ethereum:

  1. Stay Informed on Technology Updates: Ethereum’s ongoing upgrades, especially the upcoming Pectra upgrade, are crucial for its long-term value. Understanding these upgrades is key for making informed decisions.
  2. Watch Bitcoin’s Movements: While the relationship may be weakening, Bitcoin still influences the broader crypto market, including Ethereum. Bitcoin trends provide valuable context for ETH price action.
  3. Track Regulatory Changes: The regulatory landscape is constantly evolving. Staying informed about new regulations and their potential impact on Ethereum is vital for understanding risks and opportunities. The approval of Ethereum ETFs is a significant development to watch.
  4. Consider the Broader Economy: Global economic conditions like inflation, interest rates, and geopolitical events can significantly impact investor sentiment and money flows into crypto. Being aware of these trends can help you anticipate potential price movements.
  5. Analyze Network Data: Metrics like transaction volume, network activity, and staking figures can provide insights into Ethereum’s health and usage, which can signal future price movements.
  6. Gauge Community Sentiment: While not always a direct predictor, understanding the prevailing mood among crypto enthusiasts and analysts offers perspective on potential future price trends.
  7. Understand Staking Dynamics: If you’re participating in or considering staking, understand the current yields, lock-up periods, and how staking impacts the circulating supply. Ethereum’s potential to become deflationary under certain conditions is also important.
  8. Manage Risk: The crypto market is inherently volatile. Always do your homework, understand the risks, and only invest what you can afford to lose.

What’s The Bottom Line On ETH Price Factors?

Ether’s price is influenced by a fascinating mix of factors – from its underlying technology and development to broader market trends, regulatory changes, and global economic conditions.

Protocol upgrades hold promise for enhancing the network’s capabilities and potentially boosting its price.

While historically tightly linked with Bitcoin, recent data suggests Ethereum may be developing more independence in its price movements.

The evolving regulatory landscape continues to create both challenges and opportunities, with recent approvals of Ethereum ETFs marking a significant step toward mainstream adoption.

Global economic factors like inflation and interest rates play crucial roles in shaping investor sentiment and capital flows.

Finally, Ethereum’s staking mechanism and community sentiment contribute to the ongoing price discovery process.

Understanding these influences is essential for anyone looking to navigate the Ethereum market with confidence rather than confusion!

Final Tips

Here are some final tips when trading ETH:

  • Cryptos are still an emerging asset class and technology. Price volatility for ether is high and will remain high for years to come.
  • Manage your risk accordingly. 50% – 80% drawdown scenarios have been seen in the past and are still a possibility in the future.
  • Don’t use leverage to trade crypto if you’re new to the crypto game.
  • Regularly keep up-to-date with Ethereum developments. Changes will be made to the protocol as adoption and use cases grow. This could change the current bullish/bearish sentiment on ETH quickly.

If you’ve made it this far, then congrats! You now have the base level of knowledge needed to start your journey into ether (ETH) trading.

You can now start analyzing the different themes/narratives that are likely to influence supply & demand for ether, as well as recognize potential catalysts that may drive the price action in ether in the future.

The next step is to start putting this knowledge into practice, turning it into ETH market analysis and trading skills.

To do that, we need to apply a framework of daily practice to that knowledge, and if you’re new to that as well then you can start with my “Beginner’s Guide to Trading Crypto” course.

You’ll learn a simple process on how to build a crypto trading strategy. Check it out!