Ethereum: Has the Run to $9000 Started?!
Long-term upside potential outweighs short-term downside risk
Last week I showed my Premium Crypto Trading Members ETH should ideally bottom around $2010-2325, and on Sunday, May 30th, it bottomed at $2275. Again, right smack in the middle of my ideal (orange) target zone. See Figure 1 above.
With two out of two forecasts correct, the EWP is once again an accurate and reliable forecasting tool. But then I always become wary as the winning streak always ends at some point. I.e., most analysts -including me- are right about 65-75% of the time.
However, if ETH can rally above the $2920 high made last week, without dropping below Sunday’s low first ($2275) and especially not below $1736, then it has great potential for the ideal impulse wave count as shown in Figure 1, and Blue Primary wave-V should then ideally target $8600-9200.
Primary-v will as shown, subdivide into five smaller (black) major waves. I have annotated where each of those waves should ideally top and bottom. Now we will let the market dictate if it wants to follow this typical Fibonacci-based impulse pattern or potentially go beyond those, i.e., extend. Wave-extensions can never be forecasted, only anticipated.
Bottom line: Two weeks ago, I correctly concluded, based on the EWP, “the downside risk from current levels is still almost 50% ($2700 vs. $1850-1445).” But also mentioned, “upside potential from current levels is now most likely 500+%.” ETH bottomed at $1736 and is up over 50% since. Suppose it can stay above critical downside levels, i.e., the lows made over the last two weeks and breakout above $2920 going forward. In that case, it has the potential to move to ideally $4400-4600 for wave-1 of wave-V, drop to $2800-3400 for wave-2 of wave-V and then rally to as high as $9200 for wave-5 of wave-V. From there, a multi-month correction will start.
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Are Non-Fungible Tokens Breaking Ethereum?
Periodic booms in cryptocurrency valuations come and go. In March of this year, Bitcoin hit an all-time high of $60,000 per coin, making the previous “boom” of 2017 pale in comparison.
Increases in the valuation of Bitcoin generally result in a corresponding rise in the values of other cryptocurrencies and a consequent increase in the interest in blockchain technologies. As the value of Bitcoin rises, so do the values of all other cryptocurrencies such as Ethereum (ETH). It’s easy to think of Ethereum as being the “silver” to Bitcoin’s “gold.” But in reality while the Bitcoin blockchain is used for virtually nothing but trading Bitcoin, the Ethereum blockchain is also a platform for executing program logic on the blockchain (smart contracts). These smart contracts power an increasingly diverse family of distributed applications. Moreover, while the core technologies underpinning Bitcoin are fairly static, the Ethereum network is poised to undergo several major technological shifts.
Proof of Work
The Ethereum and Bitcoin blockchains originally shared the same core algorithm for securing transactions—the Proof of Work protocol. This protocol is what makes public blockchains immune from hacking—one would have to apply computing power equivalent to the entire distributed network of blockchain nodes to falsify a transaction. Proof of Work is a truly unique innovation allowing a distributed system to guarantee the integrity of its data records. However, Proof of Work is computationally and environmentally very expensive and limits the transactional throughput that can be supported by the network.
The limits of Proof of Work on Ethereum were seen in 2017 during the “CryptoKitties” boom. CryptoKitties started as a game on Ethereum, which allowed players to breed “digital cats.” Each cat’s unique identity was stored on the blockchain, and each cat had a unique genetic makeup. Some “Kitties” became immensely valuable and intensely traded, but the delays in processing Ethereum transactions during peak processing brought the Ethereum network to its knees.
NFTs
Recently, we’ve seen a similar boom in another category of mostly Ethereum-mediated digital assets. Non-fungible tokens (NFTs) are Ethereum-based identifiers that are associated with real-world assets. Normal Ethereum tokens are “fungible”—my ETH coin can be exchanged for your ETH coin. However, an NFT is tied to a specific asset in the real world and cannot be converted into anything else. NFTs have been created that represent the ownership of artwork, in-game items, or collectibles.
Part of the NFT concept makes a lot of sense—a blockchain-based token can indeed be used to transfer ownership of an associated real-world item without the need for third-party mediation. However, a lot of NFTs have been created that appear to be associated with intangible or easily copied digital artifacts. For instance, Twitter co-founder Jack Dorsey’s first tweet was “sold” as an NFT for 1630 ETH ($2.9 million)!
Ethereum Enhancements
Whatever you think about NFTs, the increase in load on the Ethereum network has created another scalability crisis. Ethereum transaction fees are going through the roof, and delays on the network are increasing. If Ethereum is going to compete successfully against up-and-coming alternative chains such as Hedera Hashgraph, something has to be done to improve the throughput of the network. Luckily, we are on the verge of several big paradigm shifts in Ethereum with ETH 2.0, which may pave the way for greater throughput.
Firstly, the Ethereum “Beacon Chain” has introduced an alternative to Proof of Work for confirming transactions. Proof of Work is replaced with “Proof of Stake,” in which validators stake an amount of Ethereum as a guarantee of integrity. While with Proof of Work, you would have to assemble an unreasonable amount of computing power to falsify a transaction, with Proof of Stake, you would need to assemble an unreasonable amount of Ethereum currency. Secondly, “shard chains” will allow the Ethereum network to be partitioned into multiple blockchains that can operate in parallel, increasing throughput proportionally. Both enhancements are due in 2021.
Given the already intense activity on the Ethereum network and the rapidly rising capitalization of Ethereum cryptocurrency (as I write this article), it’s likely that these changes will result in a substantial uptick in Ethereum utilization. The increase in value of the Ethereum currency is already outpacing Bitcoin’s meteoric rise. It is not inconceivable that following the introduction of ETH 2.0, Ethereum will compete with Bitcoin as the dominant blockchain.
Ethereum hits its highest ever crypto-market share as investors load up following dramatic May selloff
Ethereum represented more than a quarter of crypto assets under management in late May. Photo by S3studio/Getty Images
Ethereum’s market share rose to its highest on record during the last week of May, CoinShares said Tuesday.
Ethereum’s market share of nearly 27% was boosted as investors took advantage of a drop in price during May’s crypto market crash.
Bitcoin investment logged outflows of $4 million last week but inflows remain positive for 2021.
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Ethereum’s market share leaped to its highest point on record during the last week of May as investors took advantage of a price drop.
Ethereum’s market share rose to nearly 27%, becoming the top investment product among crypto assets last week, according to figures from CoinShares released Tuesday. Investors snapped up $46.8 million in ether, the token representing the world’s most utilized blockchain.
Ethereum prices and those of other cryptocurrencies were throttled lower as part of a massive selloff in the space, fronted by a plunge in bitcoin below $32,000 as the crypto market faced regulatory threats. Officials in China again said they would crack down on mining and trading of bitcoin, citing environmental and social concerns, and the US Treasury outlined plans to have cryptocurrency transfers of at least $10,000 reported to the Internal Revenue Service.
But that “digital price weakness” also propelled investors to push $74 million in the market as trading wrapped up in May, CoinShares said.
Ether’s price hit its lowest point of the month on May 23, sliding by 24% to $1,737.47 from the previous session. The cryptocurrency had already been under pressure the week before as it was knocked down from above $4,000.
“The price correction had a minor impact on investment flows the previous week, but this looks to have recovered, with all product providers seeing inflows,” said CoinShares about ethereum. Ethereum eventually trimmed May’s price decline to roughly 2%.
Outflows remained focused on bitcoin investment products last week, leaving the world’s most traded crypto to log a decline of $4 million. However, inflows into bitcoin investment products were still positive for 2021, at $4.4 billion.
Inflows across crypto assets reached $298.4 million in May, putting total assets under management at $45.1 billion, the analytics firm said.