Is it possible to comment on the current price of a cryptocurrency without making a price prediction? If so, then I want to talk about the price of ether (the native token of the Ethereum network). At the moment I’m writing this, ether is trading at $1576 per token. We don’t yet have any pricing models that enjoy broad consensus, so the price of ether is essentially speculative. We neither understand exactly why it is trading at $1576 or whether it will go up or down in the near future.

Even so, it’s possible to make a few observations about what the history of ether prices suggests to us.

The ethereum rainbow price chart suggests several things: (1) there is a growing demand for ether, (2) that demand can essentially be plotted on a logarithmic scale to show that demand has been growing exponentially, (3) that even with exponential growth in demand, demand has not increased smoothly, (4) there are times when demand appears to be increasing faster than the long-term regression would suggest and times when demand increases more slowly than the long term trend.

I think the underlying truth of the rainbow chart is not that the price fits neatly into a particular regression curve (or curves, if you prefer), it’s that the history of Ethereum has been exponential growth in demand. Based on this history, I would expect demand to continue to grow exponentially. Now that Ethereum has completed the Merge, we are seeing incredible advances in the technologies that allow the network to handle more transactions. Indeed, zkEVM and other L2 rollups alone promise a massive increase in bandwidth and utility (esp. in the form of privacy). In the absence of these L2 developments and protodank sharding, I would expect Ethereum’s network growth to stall. But with these scaling developments, it seems reasonable to expect a much greater growth in network usage and demand.

The implications are interesting and I can’t wait to see what they will be. A few guesses: Increased usage by financial entities and individuals in free economies will be the tail that wags the political dog. You already have 38% of voters (according to one survey) considering politicians’ crypto stances when casting votes.

No politician in the United States can afford to throw away more than a third of voters.

Increased demand/use by individual investors will create supply of services for investors by traditional investment entities: everyone from Schwab, Fidelity, and Vanguard to your local bank and credit union. No financial institution can afford to throw away all that new financial business.

Increased usage and bandwidth will make crypto far, far more useful. When only 10% of businesses had fax machines, it was a crappy technology with almost no use. When 90% of businesses had fax machines, it was still a crappy technology with a ton of use. I’m an old enough cat to remember when every business -- every one -- used a ton of that awful fax paper because it was so ubiquitous.

Increased usage will lead us to discover emergent properties for cryptocurrencies that we don’t yet anticipate. I did not foresee how the bandwith for cellphone data would lead to Uber, Instagram, Twitter, Facebook, email with large attachments, or having your entire photo album in your pocket.