Ethereum prices surged on Monday to record levels, after bitcoin also hit all-time highs, as appetite for digital assets continues to grow.
The cryptocurrency was trading at around $407.10 in early Monday morning trading, according to data from industry website Coinmarketcap. This is a record level which marks a more than 5,001 percent rise in price since Jan. 1, when ethereum was trading at $7.98.
It comes after bitcoin traded above $3,000 for the first time on Sunday, continuing its huge rally for the year.
"The strong interest in bitcoin does boost investors' appetite for alternative cryptocurrencies where superior gains are also being seen," Pavel Matveev, co-founder of Wirex, a personal finance app that provides a cryptocurrency wallet and debit card, told CNBC by email.
"There is some correlation between cryptocurrencies in this sense but there is also fundamental demand for Ethereum in its own right. Ethereum and bitcoin aren't directly competing as they serve different needs."
What is ethereum?
Ether is the name of the cryptocurrency which runs on the ethereum blockchain, which is the technology that underpins the digital coin. But ethereum is often used as shorthand for the digital currency as well.
Ethereum has been designed to support so-called smart contract applications. A smart contract is a computer program that can automatically execute the terms of a contract when certain conditions are met. This use has excited many investors.
Ether is the second-largest cryptocurrency by market capitalization, worth around $36 billion, according to Coinmarketcap, below bitcoin's $48.91 billion valuation.
Why has it rallied?
A number of developments in the ethereum community have supported the price rise. These include:
- The formation of a group called the Enterprise Ethereum Alliance (EEA) aimed at linking large enterprises to technology vendors to work on blockchain projects. Companies such as Microsoft and JPMorgan are involved.
- A surge in so-called initial coin offerings (ICO) which are a new way for cryptocurrency start-ups to raise money.
- Vitalik Buterin, founder of Ethereum, recently met with Russian President Vladimir Putin, signaling that the country might be looking to use the blockchain, giving it further legitimacy.
- Singapore's government released a report detailing a test it had carried out to digitalize a national currency using ethereum blockchain technology.
"Ethereum's market message at the moment is that of the underdog to bitcoin with more potential. The complexity of the developing ethereum ecosystem is galvanizing adherents as well as displaying the functionality that it has to offer," Charlie Hayter, CEO of industry website Cryptocompare, told CNBC by email.
Where does the price go next?
Nicola Duke, a technical analyst at analysis platform Forex Analytix, said that ethereum has pushed through $377, which is a key "resistance level." This is a price that is reached but not exceeded by traders. But now that it is through this level, the next leg up in ethereum could see it reach $476 soon. Duke is a technical analyst using historical price activity to forecast future price movement.
Meanwhile, Wirex's Matveev said that $600 by the end of the year is within reach, which would mark a 47 percent increase from Monday's high.
WATCH: These are the unexpected winners of the cryptocurrency craze
