Ethereum, or ether for short, hit a record high of US$3,400 ($4,400) before settling at just shy of US$3,350 ($4,340).

The currency's rapid surge has been linked to the growing popularity of NFTs as well as a surprise move by the European Investment Bank (EIB), which recently issued $120 million worth of two-year bonds on the ethereum network. 

NFTs are unique collectible tokens that are permanently tied to a specific digital asset. Their sudden rise in popularity was sparked by a string of artists, influencers and musicians who turned to selling NFT versions of their digital art, with investors and collectors (virtually) lining up to jump on the new craze. 

Given that NFTs live on a blockchain, mainly ethereum, the surging popularity of the new asset class has seen the number of active buyers for ethereum grow, ultimately lifting the value of the cryptocurrency.

RMIT’s senior lecturer, Angel Zhong, believes the NFT craze is likely to continue to drive the value of ethereum, but she questioned how valuable the coin can become. 

“At this stage, it is unclear the upper limit of ethereum, as there is always an irrational or psychological component in financial markets. A similar example is that no one would have predicted that Gamestop could surge to beyond US$400,” she said. 

According to eToro’s market analyst, Simon Peters, the real-world applications for ethereum, including the EIB’s recent move, have instigated its sudden surge.

“Ethereum has been moving in a sharp upwards trajectory since its latest hardfork as it continues to prove its use-case. The number of DApps (Decentralised Applications) continues to grow on the platform, and there is now growing demand from institutional investors for the ethereum cryptoasset itself,” he said.

Ether prices have more than quadrupled in 2021, soaring 375 per cent. The cryptocurrency is currently the second-largest digital currency by market value, although it is currently still worth less than half of bitcoin based on market capitalisation.

The total value of all ethereum in circulation is now about $367 billion, according to CoinMarketCap. Bitcoin’s market value is US$1.1 trillion ($1.42 trillion).

A year ago the price of ethereum was US$210.

As ethereum surges and bitcoin lingers below record highs, bitcoin’s share of the market has dropped below 50 per cent for the first time in nearly three years.