When Will It Be Safe to Buy Ethereum?

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Cryptocurrency prices have been all over the map, as volatility really shakes this group. First it was just Bitcoin (CCC:BTC-USD) that was showing signs of weakness. Then Ethereum (CCC:ETH-USD), Bitcoin Cash (CCC:BCH-USD) and others began to waver. It’s actually been pretty interesting to watch this group.

Concept coins for Ethereum (ETH) and Ethereum Classic (ETC).

Source: Shutterstock

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In February, most high-growth tech stocks peaked, leading to a fast, painful bear market in this group. Low-quality SPACs with no revenue and other speculative bets declined 70% to 80%. High-quality, high-growth companies tumbled 40%-plus.

It was a really big pullback, yet cryptocurrencies seemed to do just fine.

Bitcoin peaked in April on the same day as Coinbase’s (NASDAQ:COIN) debut. That top for Bitcoin was a red flag for cryptos. However, Bitcoin didn’t immediately roll over. Instead, it pulled back from its high, then drifted somewhat aimlessly until May. At that point, Ethereum, Dogecoin (CCC:DOGE-USD) and others ripped higher.

Now the whole group is volatile. So what do the charts say about Ethereum?

Trading Ethereum After the Dip

Daily chart of Ethereum

Click to Enlarge

Source: Chart courtesy of TrendSpider

In early April, Ethereum broke out over its resistance, clearing $2,000 in the process. In a very bullish development, the cryptocurrency’s prior resistance then became its support. That helped pave the way for its surge above $4,000.

However, those prices couldn’t be sustained, and Ethereum came crashing back to earth. From its peak to its recent trough, it fell 60.5%. That decline took just a few days to pan out, highlighting how volatile this space can be, both on the way up and on the way down.

Despite Ethereum’s lofty recent losses, there are some silver linings for it. First, the area near $2,000 that the currency had reached during its previous breakout held as support after the violent pullback. Second, the 21-week moving average held as support, too. Consequently, we have some reference points to watch when the currency drops.

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However, Ethereum has had its challenges, too. Its 50-day moving average continues to act as resistance, and there are questions as to whether Ethereum can reclaim the $3,000 to $3,250 area without at least one more decline first.

If the currency clears $3,000, keep an eye on $3,250, which is roughly the 21-day moving average. If Ethereum climbs above that point, the $3,500-plus level will be in play.

On the downside, I wouldn’t hate a retest of the $2,000 area, which is roughly the 21-week moving average. If that point fails to hold, we may see a test of the 200-day moving average and a retest of the prior all-time high near $1,425. Such a decline would be likely to create a reasonably good buying opportunity for crypto investors.

Is Ethereum Safe to Buy?

Investors need to understand something when it comes to cryptocurrencies: This group is incredibly volatile!

I’m not necessarily a diehard bull when it comes to the group, either. They have meaningful applications and a limited, controlled amount of supply. Consequently, cryptocurrencies are somewhat attractive.

With Ethereum specifically, the currency has attractive and useful qualities. That’s one reason why so many people believe that paying for things with it is convenient and why NFTs are always purchased with it.

That said, this group is so volatile that it’s hard to imagine it ever becoming widely used around the world. Not to mention the regulatory headaches that come along with it or the fact that virtually every government in the world would fight it. Simply put, I don’t think Bitcoin, Ethereum or any other cryptocurrency will replace the U.S. dollar.

But that doesn’t mean that we can’t make money with this group or that I think it will disappear.

We must keep in mind that Ethereum more than doubled, climbing 128.4%, in just 42 days. From the high, it took just 11 days for it to fall more than 60%. That’s not the kind of stability that a reserve currency needs.

So is Ethereum safe to buy? I don’t think cryptocurrencies are going away, but intense volatility will keep many investors from calling Ethereum “safe.” There are a handful of cryptos that likely have staying power. Bitcoin is the obvious one, but Ethereum should be fine, too. As a result, I am okay with buying these names on weakness, using a part of investment portfolios devoted to speculative assets.

I would love an opportunity to buy Ethereum between $1,400 and $2,000, although that opportunity may have passed.

On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.

Could This Eco-Friendly Crypto Surpass Bitcoin and Ethereum?

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But there’s still room for improvement. For example, here’s how speed and energy consumption compares for three coins:

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That’s where Ethereum comes in. It introduced the first programmable blockchain. When you make Ethereum payments, you can include conditions. Plus, other applications and cryptocurrencies can be built on the Ethereum platform.

When Bitcoin launched in 2009, it was revolutionary. The challenge is that it’s difficult to program Bitcoin. For example, I can securely transfer 0.02 Bitcoin to you. But I can’t include any conditions, meaning I can’t transfer 0.02 Bitcoin to you in exchange for your secondhand car.

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Cardano (ADA) is one such coin. Created by crypto trailblazer Charles Hoskinson, who also co-founded Ethereum, Cardano is the result of years of academic research and planning.

Both face two big issues: high carbon footprints and slow transactions. And while it is possible to layer solutions onto these coins, there are newer, cheaper, and faster cryptocurrencies that consume a fraction of the energy.

Once you’ve dipped your toe in the crypto waters, you’ll discover that Bitcoin (BTC) and Ethereum (ETH) are only the tip of the iceberg. They may be the biggest and most well-known cryptocurrencies, but they’re not perfect.

Ethereum is upgrading to Eth 2, which will address some of these issues. But third-generation cryptocurrencies like Cardano have skipped the carbon-guzzling, slow transaction stage. Cardano doesn’t need upgrades to perform faster and better because it has been engineered differently.

Proof of work vs. proof of stake

The reason Bitcoin and Ethereum consume so much energy is that both use a proof of work (PoW) mining model. Mining is the way these blockchains add new blocks and verify transactions. A blockchain is a sophisticated database made up of interconnected blocks.

As the value of these cryptocurrencies increases, mining new blocks becomes more profitable – and more companies want to do it. By design, only one Bitcoin block can be mined every 10 minutes. If more computing power is added, the mining becomes harder, meaning more energy is consumed to reach the same endpoint. The inefficiency is built into the system.

In contrast, proof of stake (PoS) only allows people who own some of the currency to validate transactions. This is called staking. The built-in limit means mining can’t get out of control as there’s no economic incentive to keep adding more computing power.

Cardano is built on a PoS system. Ethereum’s Eth2 upgrade would move it to a PoS model and cut its energy by 99.95%.

Can ADA surpass ETH?

It’s worth saying that it’s not necessarily an either/or situation with these coins. I own both because I think each coin has a lot of long-term potential.

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Now, Ethereum and Cardano are competing in the same space. They’re scalable, programmable platforms, and both will offer smart contracts and allow for the development of applications. Both have strong teams with a lot of crypto experience.

But there are some big differences.

Cardano spent years researching, testing, and planning its network. Each step it takes has been peer-reviewed. It has attracted experts in various fields to ensure the system is robust and scalable.

And some believe Cardano can overtake Ethereum. The problem? It isn’t there yet. Cardano says it will launch smart contracts (self-executing pieces of code on the blockchain) later this year.

Ethereum already has 2,700 applications running on its network. Its smart contracts are working, it is the backbone of the burgeoning market in non-fungible tokens (NFTs), and it hosts a large number of decentralized finance (DeFi) projects. Decentralized finance applications cut out the middleman (such as a bank) on loans, interest-earning accounts, and other financial services.

However, until Eth2 launches, Ethereum remains energy intensive. It also has extremely high gas fees (like transaction fees) that get more expensive when the network is congested.

Ethereum may have thousands of apps running on its platform, but Cardano already has relationships with governments in developing countries. For example, it recently launched a project with the Ethiopian Ministry of Education. It looked to real-world uses for the platform from the outset.

The next year will be important for both cryptocurrencies. If Ethereum can transition to Eth2 without major hitches – and without security breaches – it’s likely to lead the pack for the foreseeable future.

But, assuming Cardano’s smart contract rollout is problem free, it will soon provide low-fee, speedy transactions to NFTs and DeFi applications, which is likely to attract a big share of the app market. That, plus its real-world relationships, means there’s a good chance it could topple Ethereum from that top spot in the long term.

If you do decide to buy any of these cryptocurrencies, bear in mind that these are highly volatile investments and only invest money you can afford to lose.

Bitcoin (BTC), Ethereum (ETH), Alt-Coins - Beware of Weekend Volatility

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Bitcoin (BTC/USD), Ethereum (ETH/USD), and Alt-Coin Analysis and Charts:

Bitcoin (BTC/ USD ), Ethereum (ETH/USD) struggle to break higher.

Lower volume over the weekend may spark a volatility breakout.

The cryptocurrency market is on the back foot ahead of a long weekend in a raft of countries, including the UK and the US, and with volatility levels still high, whippy price action over the coming days cannot be discounted. The current market capitalization is around $1.6 trillion and is nearly 40% off its all-time peak, highlighting that the recent heavy losses have not been pulled back to any great extent. Traders need to be aware that low volume and high volatility markets are ripe for large swings, and with sentiment in the cryptocurrency market still dented, further losses cannot be ruled out.

JOMO is the New FOMO: Trade with the Joy of Missing Out

Bitcoin continues to struggle and any rally will have to overcome the 200-day simple moving average which is currently capping BTC/USD. Bitcoin has not been below the 200-dsma for over a year, so the recent breakdown remains worrying. The 200-day sma currently sits around $40,700. Volatility levels are off their recent extremes but remain high at $4,650 compared to a spot price of $37,000

Bitcoin (BTC), Ethereum (ETH), Alt-Coins – Recovery Remains Fragile, Volatility Stuck at Near-Extremes

Bitcoin (BTC/USD) Daily Price Chart

The Ethereum chart looks a little more positive than Bitcoins and highlights the positive performance of the ETH/BTC spread this year. ETH remains above its 200-day sma by a large margin, although the recent slip below the 50-dsma is a short-term negative. If this can be regained, then $3,000 should be achieved relatively quickly. Again, volatility is high at $443 against a spot price of $2,600.

Ethereum(ETH/USD) Daily Price Chart

The alt-coin market remains depressed with any move higher being sold into. It looks like the hot-money crowd has veered away from the alt-coin space and moved back into meme stocks. AMC Entertainment has more than doubled in the last week, alongside massive option volume, while another meme favorite GameStop is up by nearly 50%. It will need Bitcoin, and increasingly Ethereum, to steady and then push ahead to draw the fast money crown back to the alt-coin space.

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What are your views on Bitcoin (BTC),Ethereum (ETH) – bullish or bearish?? You can let us know via the form at the end of this piece or you can contact the author via Twitter @nickcawley1.

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