Why the Price of Ether Is Volatile Today

What happened

The price of Ether (CRYPTO: ETH), 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 (CRYPTO: BTC), 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.

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.

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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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