Like Bitcoin, Ethereum (ETH) is also known for its high price volatility. There are several factors that contribute to ETH's price volatility, including:
Market sentiment: As with any asset, the price of ETH is heavily influenced by market sentiment. Positive news about Ethereum, such as the adoption of its technology by major companies or the announcement of new features, can drive up the price, while negative news can cause the price to drop.
Decentralized finance (DeFi) and other use cases: Ethereum is the foundation of the decentralized finance (DeFi) ecosystem, which has grown rapidly in recent years. DeFi applications allow users to lend, borrow, and trade cryptocurrencies without relying on centralized intermediaries, and their popularity has helped drive up demand for ETH. Additionally, other use cases for Ethereum, such as non-fungible tokens (NFTs), have also contributed to its price volatility.
Supply and demand: As with any asset, the price of ETH is also affected by supply and demand. When more people want to buy ETH than sell it, the price goes up, and vice versa.
Technical factors: ETH's price can also be affected by technical factors, such as the speed and cost of transactions on the Ethereum network, as well as the overall health of the network.
Overall, ETH's price volatility is a reflection of its status as a relatively new and highly speculative asset. As the Ethereum ecosystem continues to grow and mature, it's possible that ETH's volatility will decrease, but for now, investors should be prepared for the possibility of large price swings.