Why Ethereum is unlikely to drop below $1,500 anytime soon

Why Ethereum is unlikely to drop below $1,500 anytime soon

Investors remain relatively bullish on Ethereum, as lately, they have been eager to acquire Ether at above the $1,500 mark.

Ethereum has had sustained outflows over the last 3 weeks and now we have more than 3.5 million Ethereum staked in 2.0. The exchange reserve on Ethereum is declining constantly. This reflects accumulation and confidence in the market.

Ethereum reserve in all exchanges hit the two-year low.

READ:

However, at the time of drafting this report, a significant amount of profit taking was observed, as the utility crypto traded at $1,776.17 with a daily trading volume of $25.4 billion and is down 3.38% for the day.

It’s also critical to note that miners remain more attracted to Ethereum as they earn almost four times more than those in the Bitcoin network. Ethereum’s fees which amount to the total dollar value spent on the Ethereum blockchain — are at record levels, with over $8 billion in annualized fees.

READ:

While Bitcoin, the world’s most popular Crypto asset, annualized fees are currently around $2.3 billion. This contrast highlights Ether’s growing utility and the reason why it is often referred to as digital fuel.

The odds have been on the utility crypto’s side since its recent upgrade, Ethereum 2.0 (a network that promises better functionality and experience to the Ethereum network).

Unique features of the notable upgrades include a shift from Proof of Stake (PoS) to Proof of work, a new blockchain referred to as the beacon chain that provides better scalability. All of this and more is expected to be phased in through a carefully planned roadmap.

Through the implementation of efficiency, enhancements, scalability, and speed, the Ethereum network becomes better without compromising its decentralization and security.

Bitcoin Could Boom 430% but Ethereum May Still Steal its Thunder

Bitcoin believers may have new reason to rejoice following the stimulus checks, but Ethereum has use cases on its side.

U.S. President Joe Biden’s $1.9 trillion COVID Relief Bill has passed congress and stimulus checks are soon to be distributed. Early signs indicate recipients are ready to buy Bitcoin.

A survey by Mizuho Securities showed that out of 235 participants who expect to receive stimulus checks from the COVID Relief Bill, 10% are interested in investing in Bitcoin. It’s a small sample size, but according to the survey investing in Bitcoin was a more popular response than investing in traditional stocks.

If that kind of runaway popularity doesn’t move you in itself, consider that it could translate into $40 billion dollars running like a river directly from Biden’s $1.9 trillion stimulus package into Bitcoin.

In the same week, Bank of America strategists suggested to Bloomberg that the price of BTC can be moved 1% for just $93 million.

Bank of America strategists said in a note to Bloomberg on Wednesday: “Bitcoin is extremely sensitive to increased dollar demand. We estimate a net inflow into Bitcoin of just $93 million would result in price appreciation of 1%, while the similar figure for gold would be closer to $2 billion or 20 times higher. In contrast, the same analysis for the 20-year-plus Treasuries shows that multibillion money flows do not have a significant impact on price, pointing to the much larger and stable nature of the U.S. Treasuries markets,”

If you take the survey and projections on face value, you could surmise Bitcoin prices will be moved by over 430% by the influx of $40,000,000 flowing in from invested U.S. COVID Relief money.

See also: How to Buy Bitcoin (BTC)

It seems reasonable to expect the 12 month Bitcoin bull run to continue, making it the crypto success story of 2021, right?

DeFi Could Steal Bitcoin’s Thunder

Before the Bitcoin bull run, DeFi was a strong competitor as the most dominant story in crypto. BTC’s new price heights have made the world’s most famous cryptocurrency again the center of attention. Bitcoin may always be the star of the cryptoworld and certainly has seen wide popularity and acceptance as a store of value, but Ethereum’s fortunes have generally kept pace with and possibly exceeded Bitcoin since the end of last year.

Story continues

Since December 2020, Bitcoin has risen from over $28,000 to more than $58,000 (up roughly 207%). Ethereum has traveled from more than $746 to over $1800 (up roughly %240).

This week, Bank of America published a report titled “Bitcoin’s Dirty Little Secrets”. Excerpts from the report are unflattering to the world’s most famous cryptocurrency.

Some of the statements coming from the report include:

“The main argument for Bitcoin is not diversification, stable returns, or inflation protection, but sheer appreciation…”

“There is no good reason to own BTC unless you see prices going up…”

And they point out Bitcoin’s environmental impact is not desirable, stating: “we calculate that a $1bn dollar inflow into Bitcoin is equal to 1.2mn cars driven over the course of a year or 12.7mn barrels of oil.”

They go on to extol the virtues of Ethereum, stating in the report: “Bitcoin is the most talked about cryptocurrency but Ethereum [the blockchain] has more features, including being more flexible in its hosting of decentralized finance (DeFi) than the Bitcoin blockchain.”

“DeFi does, however, show the opportunity which (distributed ledger technology) offers to finance. We believe that one of the best differences against being disintermediated by DeFi would be mainstream finance grasping these opportunities.”

The Hopes and Fears of DeFi…

As a digital currency, Bitcoin is simply designed with a more limited range of use cases compared to Ethereum which has smart contract capabilities. Arguably, Ethereum is the needed sequel to Bitcoin’s success. But how will their performances compare in 2021?

“Bitcoin is the asset of choice for investors looking for a store of value investment characteristics in the cryptocurrency market. Success then is an ongoing price appreciation for this asset. And appreciate it will as long as investors continue to believe in the future of blockchain and cryptocurrencies. Ethereum, on the other hand, is not only a cryptocurrency. It is a network that supports smart contracts, Dapps (decentralized applications), and Defi (decentralized finance) projects. Investors that are looking to invest in up-and-coming tech should pay extra attention to this crypto asset. Over 41 Billion dollars is currently locked in DeFi projects on Ethereum blockchain compared with 4 Billion only 8 months ago. That’s what success continues to look like for Ethereum this year as well – ongoing expansion and innovation,” Tally Greenberg, Head of Business Development at Allnodes said.

Phase 0 of Ethereum 2.0 – known as “Serenity” – launched on December 1, 2020. The hope for this upgrade to the Ethereum network is meant to address the needs for speed, efficiency, and scalability.

“BTC is unlikely to be dethroned as the leading cryptocurrency, but the growth shown on the Ethereum blockchain is hard to bet against. They will naturally be compared ‘against’ one another although this makes little sense from a functional point of view since each is vying for separate and mutually beneficial use-cases. BTC’s ‘digital gold’ narrative is straightforward which is beneficial for attracting new users who may be intimidated by the apparently more complex and dynamically evolving ETH narrative,” Jason Peckham, Analyst at Invictus Capital said.

It remains to be seen whether Ethereum 2.0 will handle the need for speed to support the DeFi range of use cases.

“To me, Ethereum looks very attractive for long-term purchases, since it has a much greater technical potential for application than Bitcoin. The Ethereum blockchain programmability offers incredible growth opportunities. Bitcoin with its limited emission is rather a tool for saving and paying. Ethereum, in turn, is a tool for real usage of blockchain technology in third-party projects,” Dyanis Zabauski, CEO of Coinmatics said.

But nevermind the actual real-world uses – can Ethereum compete with Bitcoin’s price performance?

“I think it’s highly likely that ETH will beat BTC in terms of price performance in 2021… Ethereum has not fully realized the benefit from the growing popularity of DeFi services and NFTs. The exploding NFT market will directly benefit the value of ETH and I think that ETH has room to grow until its price encompasses the current excitement around NFTs,” Noam Levenson cryptocurrency writer and founder of Narrow Straight Writing.

Some experts point to lagging performance as a reason to keep an eye on Ethereum, as we may see much more movement in 2021.

“From a relative performance standpoint, ETH the second-biggest cryptocurrency is lagging Bitcoin up only 20% from it’s All-Time Highs vs Bitcoin 175%. In previous cycles, we have seen ETH catch up to BTC growth when BTC begins to correct because the profits taken from BTC are cycled into altcoins. Because ETH is one to two cycles back from BTC in its growth cycle it makes sense that return on the laggard would outperform the larger market cap of BTC from here,” Jake Wujastyk Chief Market Analyst at TrendSpider said.

Until Ethereum 2.0 is a known quantity, there will be doubts about its ability to meet the already tremendous need for bandwidth to support transactions.

“Ethereum might beat Bitcoin in terms of percentage gain this year. So far in 2021, ETH has increased by value by nearly 150%, while bitcoin has gone up around 90%. However, it is unlikely that ETH will take over in terms of market capitalization because bitcoin is the cryptocurrency with the most people behind it in terms of adoption and use. Many view bitcoin as digital gold and major corporations and institutional investors are adding it to their balance sheets. Ethereum is unscalable in its current iteration and acts more as a platform for decentralized applications than a store of value” Ben Weiss, president and COO of CoinFlip said.

The launch of an improved Ethereum network is a testament to the strength of the project – but also represents change. Change conveys risk – while Bitcoin is simple, immutable, and constantly rising in value.

“I am not yet convinced DeFi is as groundbreaking as its followers deem it to be. The idea of yield farming sounds a great deal like smart contract hot potato with investors jumping from project to project, hoping they aren’t the last ones to hold the bag,” Don Wyper, COO at DigitalMint said.

Institutional investors have been key to driving the value of Bitcoin over the past 12 months. Will those same traditional investing giants turn their attention to Ethereum?

“Eventually some institutional investors will acquire ETH in order to expand their crypto exposure, while others will trade the recently launched CME ETH futures (interest is still low with volumes 8% of the CME BTC Futures). Others will acquire ETH in order to utilize and experiment with some of the applications, particularly in DeFi. However, I don’t see much movement comparable to bitcoin in the near term,” Jason Lau, COO at OKCoin said.

Conclusion

As many respondents pointed out, comparisons between Ethereum and Bitcoin make sense from an investor point of view, but the comparisons don’t go much further than that.

“BTC and ETH are different: BTC is a currency token while the ETH is a utility token. If mainstream institutional investors get into ETH, it would mean that mainstream institutions validate not only the current value of ETH, but also the Ethereum ecosystem as a whole. We have not seen signs of mainstream institutions being involved in Ethereum’s applications. So, in order for institutional investors to get on board, it would take more time and market education throughout 2021 and beyond,” Haohan Xu, CEO of Apifiny said

It may take a shift in mainstream understanding – or even a mild learning curve – to get traditional investors who have tried the familiar Bitcoin to understand the power of DeFi, but it seems the mighty bull run market is raising all ships in the cryptoworld and institutional investors are already getting on board.

“Institutional investors are already getting on board with Ethereum. Just recently, Grayscale, the world’s largest Crypto asset manager, purchased more Ethereum than Bitcoin for a change. Chinese public firm Meitu also grabbed 15K of Ether not too long ago. Galaxy Digital’s ETH funds raised 32 Million in less than a month. The launch of Ethereum Futures on the CME, the launch of Canadian ETH ETFs, and we’re just scratching the surface here… I anticipate a further surge of institutional investments in Ethereum. This is just the beginning,” Greenberg said.

Cover image modified from photo by Mater Miliano from Pixabay

See more from Benzinga

© 2021 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.

Ethereum Could Overtake Bitcoin, Messari Analyst Says

Bloomberg

(Bloomberg) – Turkey’s stocks, bonds and the lira tumbled as the shock dismissal of the central bank chief triggered concern the country is headed for a fresh bout of currency turbulence.In one of the sharpest selloffs in years, the Borsa Istanbul Index lost 9%, triggering circuit breakers that halted trading. The lira weakened more than 9%, while yields on Turkish local and dollar bonds soared.Investors also sold shares of European banks with ties to Turkey. Spain’s Banco Bilbao Vizcaya Argentaria SA, which owns about half of lender Garanti, sank 6%.The turmoil underscores concern that President Recep Tayyip Erdogan’s removal of Naci Agbal after just four months as governor marks an end to a period of policy orthodoxy that had briefly restored the lira’s fortunes after a 20% retreat last year. Agbal’s successor, Sahap Kavcioglu, a columnist and university professor, has been a critic of the recent interest-rate increases enacted under Agbal’s stewardship, including last week’s larger-than-expected hike.“The replacement of the CBRT governor is a major blow to investor confidence in Turkey,” wrote Adam Cole, chief currency strategist at RBC Capital Markets. “Not surprisingly, geographical proximity leaves Europe most exposed.”BBVA $60 Billion Turkish Assets a Focus; ING, BNP Exposure SmallThe lira’s decline puts it within a few percentage points of a record low reached on Nov. 6, the day before Agbal was appointed. It was trading at 7.858 to the dollar at 1:13 p.m. in Istanbul after weakening to 8.4707 in early Asian hours, when liquidity for emerging-market currencies tends to be thinner.The rush to sell the currency as markets reopened Monday overwhelmed support for the lira from state banks, according to a foreign-currency trader familiar with the transactions who isn’t authorized to speak publicly and asked not to be identified.Erdogan’s decision to fire Agbal, who had sought to restore the central bank’s credibility, has sparked speculation that the country will once again start easing interest rates. Before Agbal, investors frequently criticized Turkey’s monetary authority as being too quick to undo tightening and too slow to respond to risks, most recently in August 2018, when the lira lost about a quarter of its value.Some 875 basis points of interest-rate increases since November, including Thursday’s 200 basis-point increase, had helped made the lira the best carry-trade currency this year, bringing foreign capital back into Turkish markets.A “haze of volatility” has returned to Turkish markets, Stephen Innes, chief global market strategist at Axicorp Financial Services Pty Ltd. in Sydney, wrote in a note. “The market had been warming up to a more normalized monetary policy since November. This move is a big blow to these hopes.”Treasury and Finance Minister Lutfi Elvan said Monday that Turkey will continue to stick to free markets and a liberal foreign-exchange regime. The government will prioritize price stability, and fiscal policies will support the monetary authority in its efforts to rein in inflation, he said.“Markets can take some encouragement from recommitment to no capital controls and fact that state banks and presumably central bank have been selling dollars and have got the lira back below 8,” said Timothy Ash, a strategist at BlueBay Asset Management in London. “I expect massive state bank intervention in the short term to hold a line on the lira.”Market SnapshotThe Borsa Istanbul Banks Index, in which foreigners have a larger presence, fell 9.5%.The yield on Turkey’s benchmark 10-year local-currency bond rose 500 basis points to 19.06%.The 10-year benchmark dollar bond yield increased 153 basis points to 7.41%.Turkey’s five-year credit-default swaps jumped the most on record, rising to 472 basis points.Three-month options volatility on the lira reached 32%, suggesting traders are pricing in swings of about 2% on either side in daily spot moves.Kavcioglu pledged on Sunday to use monetary-policy tools effectively to deliver permanent price stability. He also said the bank’s rate-setting meetings will take place according to schedule.Kavcioglu is a professor of banking at Marmara University in Istanbul and a columnist at the pro-government Yeni Safak newspaper. The paper criticized the monetary authority’s latest interest-rate increase on its front page on Friday, saying the decision “turned a deaf ear” to Turkey’s 83 million people, would hurt economic growth and primarily benefits “London-based owners of hot money.”In a column published by Yeni Safak on Feb. 9, Kavcioglu said it was “saddening” to see columnists, bankers and business organizations in Turkey seeking economic stability in high interest rates at a time when other countries had negative rates. He also seconded Erdogan’s unorthodox theory on the relationship between interest rates and inflation, saying that raising interest rates would “indirectly open the way to increasing inflation.”Most economists think the opposite is true.Hold the LineLast year, Turkish banks spent more than $100 billion of the nation’s foreign reserves to support the currency, according to a report by Goldman Sachs Group Inc. That prompted calls by Turkish opposition lawmakers for a judicial probe into the official reserves.In comparison, foreign investors purchased a net $4.7 billion worth of stocks and bonds in the months following Agbal’s appointment. Overseas inflows to Turkey through swaps totaled about $14 billion during that period, Istanbul-based economist Haluk Burumcekci said.What Bloomberg Economics Says“The hit to the central bank’s credibility and independence can’t be overstated. Erdogan has battered the institution with interventions that have repeatedly backfired. Financial markets were willing to give Agbal a chance, his successor will find it hard to build that trust again.”–Ziad Daoud, chief emerging markets economist. For full REACT, click hereThe lira’s weakness could add to inflationary pressures building in the economy and erode Turkey’s real rate, currently the highest in emerging markets after Egypt’s.Japanese PositionsWhile Turkey’s high nominal rates are a lure for yield hunters, its mercurial inflation and the perception that central-bank policy has been too loose has made the lira one of the most volatile currencies in the world.Among those who find themselves on the wrong side of the trade are Japanese retail investors. Long positions made up almost 86% of the total lira-yen positions traded on the Tokyo Financial Exchange on Friday, the most among 14 major currency pairs, based on the latest data compiled by Bloomberg.“We will never know how successful Agbal’s approach could have been, but initial signs were positive,” said Emre Akcakmak, a portfolio adviser at East Capital in Dubai, who anticipates a reversal on some of the recent hot money inflows.“Even when the market stabilizes after a while, investors will have little tolerance, if any, in case the new governor prematurely cuts the rates again,” Akcakmak said.(Updates market pricing throughout.)For more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2021 Bloomberg L.P.