Source: PaxForex Premium Analytics Portal, Fundamental Insight
Ethereum, the second-largest cryptocurrency by market capitalization, has now fallen nearly 70% in one year and more than 75% from its all-time high set last November. The scale and speed of the cryptocurrency market's decline are alarming - during that time, Ethereum tokens have lost a staggering $415 billion in value, roughly equal to the market value of ExxonMobil.
The main drivers of the cryptocurrency sell-off were the same fears about inflation and interest rates as in the stock market. At the same time, fears surrounding Ethereum have been agrgavated by the case with cryptocurrency lender Celsius, which gives investors an opportunity to invest in Ethereum in exchange for interest payments and then lends the tokens out. On Sunday, Celsius suspended all transfers and withdrawals from its platform due to an alleged liquidity problem, further scaring crypto traders. There is concern that this could guide to even more selling arm-twisting on Ethereum (and other cryptocurrencies) if Celsius is forced to liquidate its assets.
Ethereum is now trading at prices not seen since early 2021, so investors who think they missed the boat last time have another chance to open a position at these levels.
Some of the harshest criticisms of Ethereum over the years have been the slow transaction times and high fees. However, the long-awaited move to share proof consensus - known as "Merge" - should help address these concerns. Ethereum completed the transition to share proof-of-stake on the Ropsten test network in June and should soon be ready for the full transition.
The transition to a proof-of-stake model should enhance transaction speed and reduce user or usage fees. An additional advantage is that proof-of-stake is much less energy-intensive than proof-of-work, which requires miners to solve complex mathematical puzzles using huge computing power to create new tokens. In this way, Ethereum will gain new appeal to investors who previously disliked its carbon footprint as a proof-of-work cryptocurrency like Bitcoin.
The move to proof-of-stake will also allow users to earn rewards from the network, as owners will be able to use their Ethereum to validate transactions and create new tokens. All of this makes Merge one of the best reasons to be optimistic about Ethereum.
Ethereum also has value as a blockchain on which many other leading cryptocurrencies are built. For example, Chainlink, the oracle chain that allows smart contracts to receive data from the outside world, is an ERC-20 token built on the Ethereum platform. ERC-20 is essentially a standard that allows developers to create tokens on top of the Ethereum network. Uniswap, one of the largest decentralized exchanges, is also an ERC-20 token. Even large stablecoins like USD Coin and popular meme coins like Shiba Inu are ERC-20 tokens.
The Ethereum network has more than 4,000 developers - more than any other cryptocurrency, even Bitcoin. This benefits Ethereum as developers launch new applications (dApps) that attract users and add value.
Ethereum is the dominant blockchain for NFT. Although NFT sales have slowed and prices have generally fallen during this crypto-winter, there are still some grounds for being optimistic. The NFT Goblintown collection came out of nowhere in May and provided a much-needed boost to the NFT scene. These Goblins were minted for free, but in the last 30 days, secondary sales have brought in over $75 million as Goblintown was one of the top three NFT collections, according to NFT tracker and data aggregator Cryptoslam. Three garish-looking Goblins sold for more than $100,000, indicating that despite the slowdown, the market for expensive NFTs is still alive.
To summarize, a massive transition is coming that will enhance Ethereum's performance on many fronts. Combined with an active ecosystem, this means that for risk-prone investors, now is a good time to open a position in or complement the cryptocurrency. Those who regret missing out on Ethereum's growth over the past few years have a chance to enter it at the level it was trading at in January 2021.
Nevertheless, Ethereum is still a speculative investment and there is significant volatility ahead, so investors are advised to use only a small percentage of their portfolio to it and take a long-term approach.
As long as price is below the 1700.00 level, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 1081.44
- Take Profit 1: 950.00
- Take Profit 2: 700.00
Alternative scenario:
If the level of 1700.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 1700.00
- Take Profit 1: 2000.00
- Take Profit 2: 2555.00
