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Why the Price of Ether Is Volatile Today

By Bram Berkowitz - Jun 30, 2021 at 1:19PM

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The cryptocurrency got off to a good start today before giving up some gains midday, but in general has been moving higher recently.

What happened

The price of Ether (ETH -1.07%), the native cryptocurrency on the Ethereum blockchain, has been choppy today, getting off to a good start in the early morning before giving up those gains around noon.

The price of Ether, the second largest cryptocurrency by market capitalization, had risen nearly 2% from midnight to more than $2,162, before dropping back down to roughly $2,118 by 12:35 p.m. on Wednesday.

So what

The broader cryptocurrency market is coming off a nice rebound this weekend in which the largest cryptocurrency, Bitcoin (BTC -0.09%), rose 15%.

In terms of more Ether-specific news, the Ethereum launchpad announced that it currently has more than 5.9 million Ether tokens, or roughly 5% of the total supply, being staked and 180,000 validators on the network. This is a big jump from December, when only 1.6% of the supply was being staked.

Picture of a magnifying glass over a line moving up and down on chart.

Image source: Getty Images.

This is a big deal because the developers behind the Ethereum blockchain are currently working on a set of massive upgrades called Ethereum 2.0. This will transition the network from a proof-of-work concept that relies on energy-intensive mining to a much more sustainable method called staking to validate transactions and mint new tokens.

Staking is a process in which Ether owners store a certain number of tokens away in a crypto wallet on their own personal device, and then use those tokens to validate and forge new Ether tokens. It's a more energy-efficient substitute for mining cryptocurrency.

The increase in validators willing to stake follows a significant drop in transaction fees on the Ethereum network, which has been another positive for Ether.

Now what

The increase in staking is good news for Ethereum 2.0, which I believe will be a major positive catalyst for Ether once the transition is complete. That likely won't happen until sometime in 2022 at the earliest. I am not sure if the cryptocurrency market has bottomed yet, but I'm certainly holding my Ether long term.

Bram Berkowitz owns shares of Bitcoin and Ether. The Motley Fool owns shares of and recommends Bitcoin. The Motley Fool has a disclosure policy.

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