Market Wrap: Ethereum Keeps Burning and Price Is Hot

Market Wrap: Ethereum Keeps Burning and Price Is Hot

Bitcoin’s price rose Friday, back above $46,000 after dipping as low as $43,800 the prior day.

The largest cryptocurrency by market value was trading close to its highest level in more than two months, sitting on a 60% year-to-date gain after rallying from a low around $29,000 as recently as June.

A key threshold is the 200-day moving average of the price, currently around $45,000.

Related: Cardano Jumps on Signals Smart Contracts Coming Next Month

“The 200-day moving average is pivotal in the day trader’s mind,” Matt Blom, head of trading for the digital-asset firm Eqonex, wrote in his daily newsletter. “A deeper dip to $40,900 will signal that the market is shaping up to form a new trading range, with $41,000 and $46,000 as the key levels.”

Latest prices

Cryptocurrencies:

Traditional markets:

S&P 500: 4468.1, +0.2%

Gold: $1778.3, +1.46%

10-year Treasury yield closed at 1.294%, compared with 1.369% on Thursday

What lies ahead?

In an interview this week, Blom said the $50,000 price level may prove more difficult for bitcoin to break through than when the cryptocurrency soared past that level earlier this year en route to the all-time high price close to $65,000.

Related: Dolce & Gabbana Sets Date for Haute Couture NFT Drop

That’s partly because some long-time bitcoin investors who missed the opportunity to take profits during that early-2021 rally might choose to do so once the key psychological hurdle of $50,000 is reached, Blom predicts. Such selling might “limit the upside for several weeks,” Blom said.

“As soon as we get to $50K, I think we’re going to churn,” Blom said. “People are going to take some coins off. I don’t care how much of a HODLer you are.” In crypto-trading jargon, a HODLer is an investor who buys tokens under a plan to hold them for a long time.

Story continues

Cardano announces September release date for ‘Alonzo’ upgrade

Cardano (ADA) jumped past $2 for the first time in nearly three months as the blockchain’s chief developer announced a September release date for the planned “Alonzo” upgrade – a move that would usher in smart-contract functionality and thus address what critics have described as one of the network’s most glaring deficiencies.

​​Smart-contract functionality would allow Cardano to incorporate more applications including so-called decentralized finance (DeFi) platforms that allow for automated cryptocurrency lending and trading. The improvement could put the network in a better position to challenge Ethereum, currently the leader among blockchains with smart-contract functionality.

The ADA price reached $2.08 at 9:05 UTC Friday, the highest since mid-May, when ADA was trading at $2.31 at its all-time high. Over the past 24 hours it’s up 16%. The recent price rally has pushed cardano’s market capitalization to about $65 billion, vying with binance coin (BNB) and tether (USDT) for the No. 3 rank among all cryptocurrencies by market value after No. 1 bitcoin and No. 2 ether.

Ethereum keeps burning and price is hot

Ether traders are acutely focused on data from the underlying Ethereum blockchain’s recent upgrade, known as the London hard fork – and the potential for the refresh to reduce the cryptocurrency’s supply growth.

Under Ethereum Improvement Proposal 1559, a component of the London upgrade that’s usually shorthanded as just EIP 1559, base fees paid to transact on the blockchain get “burned,” meaning they offset some of the 2 ETH created as miner rewards with each data block.

As of press time, some 38,261 ETH have been burned in accordance with EIP 1559, according to the website Watch the Burn. The amount represents more than $120 million, and has reduced the net issuance of new ether by an estimated 35%.

The big question is whether institutional investors who are creeping into digital-asset markets might start to see ether as an inflation-resistant asset, similar to the way many bitcoin bulls have cast that cryptocurrency.

As bitcoin has rallied 16% in August, ether has outperformed with a 26% gain. On a year-to-date basis, ether has quadrupled in price while bitcoin is up 58%.

FundStrat, the investment-research firm, wrote this week: “We expect fees moving through the platform to increase concurrent with the recent uptick in market activity and consequently should continue to see further disinflationary and perhaps even deflationary effects on Ethereum’s circulating supply, resulting in positive price performance.”

It’s notable that Mike McGlone, the Bloomberg Intelligence analyst who won big plaudits for his (ultimately) accurate call last year that bitcoin would hit $50,000, raised the possibility in a report this week that ether might eventually challenge the larger cryptocurrency for the top spot in the rankings of digital assets by market capitalization.

Crypto insiders often refer to that imagined change in the leaderboard as the “flippening.”

“There appears little can stop the process of ethereum ‘flippening’ to take the top spot by market cap, even it takes years rather than months at current trajectories,” McGlone wrote. “Ethereum appears on an enduring path as the go-to platform for the crypto ecosystem and decentralization of finance akin to Amazon Inc. and e-commerce.”

Poly Network exploit update

The drama around the largest hack in decentralized finance (DeFi) history appears to be coming to an end after the attacker returned most of the stolen funds to a multisig wallet set up by Poly Network, with the exception of the $33 million worth of tether that was frozen by Tether, CoinDesk’s Muyao Shen reports.

“What crypto investors and regulators should be concerned about here is that this wasn’t a hack in the traditional sense, where someone gains unauthorised access,” wrote David Janczewski, co-founder and CEO at crypto security company Coincover in an email.

“This appears to have been an exploit, where a user runs public code to take advantage of an undiscovered security issue,” Janczewski wrote. “This type of exploit certainly won’t be the last as funds deposited into smart contracts like this are always exposed to risks associated with how those smart contracts are coded.”

Altcoin roundup:

Polygon Merges With Hermez Network: Polygon, a layer 2 platform on the Ethereum blockchain, is merging with rollup platform Hermez Network in a 250 million MATIC deal. The acquisition was worth about $250 million based on MATIC’s price on Aug. 4, when the deal was struck. Hermez will be absorbed into the Polygon ecosystem under the name Polygon Hermez, where it will become a part of Polygon’s line of products, including Polygon SDK and Polygon Avail. The entire Hermez project – its employees, technology and native HEZ token (which holders will be able to exchange at a rate of 3.5 MATIC: 1 HEZ) – will be integrated into Polygon’s platform. Polygon’s merger with Hermez is the first complete merger of one blockchain network into another.

Kaszek Makes First DeFi Investment: Kaszek, a leading Latin American venture capital fund, made its first decentralized finance (DeFi) investment, leading a $3 million round in Exactly, a startup that is building an open-source, non-custodial credit protocol on the Ethereum platform. “We see a gigantic emerging opportunity in DeFi, which will change the financial landscape in unimaginable ways in the years to come,” Hernán Kazah, Kaszek’s co-founder and managing partner, said in a statement, adding that the investment is part of two recently raised funds totaling $1 billion.

Relevant News

Other markets

Most digital assets on CoinDesk 20 ended higher on Friday. In fact everything was in the green except for dollar-linked stablecoins.

Notable winners of 21:00 UTC (4:00 p.m. ET):

cardano (ADA) +12.85%

chainlink (LINK) +7.72%

polygon (MATIC) +7.65%

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What is Ethereum and how does it work?

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Ethereum is one kind of digital currency or cryptocurrency, a medium of exchange that exists exclusively online. Ethereum is among the most popular cryptocurrencies, and ranks second in total size (as of August 2021), behind Bitcoin, a coin that’s become synonymous with crypto.

Cryptocurrency has created a lot of controversy, from those who hail it as the world’s next payment system to those who view it merely as a speculative bubble. Here’s what Ethereum is and how it works.

What is Ethereum?

Ethereum is one of literally thousands of cryptocurrencies that have sprung up over the last few years. As the brainchild of 8 co-founders, Ethereum made its debut in 2015. The cryptocurrency or platform is called Ethereum, while the individual unit is called an ether (2 ether, 17 ether, etc.)

Ethereum operates on a decentralized computer network, or distributed ledger called a blockchain, which manages and tracks the currency. It can be useful to think of a blockchain like a running receipt of every transaction that’s ever taken place in the cryptocurrency. Computers in the network verify the transactions and ensure the integrity of the data.

This decentralized network is part of the appeal of Ethereum and other cryptocurrencies. Users can exchange money without the need for a central intermediary such as a bank, and the lack of a central bank means the currency is nearly autonomous. Ethereum also allows users to make transactions nearly anonymously, even if the transaction is publicly available on the blockchain.

While the whole field is referred to in terms of currency, it may be more useful to think of crypto as a token that can be spent for a specific purpose enabled by the Ethereum platform. For example, sending money or buying and selling goods are functions enabled by the coin. But Ethereum can do a lot more, and it can also form the basis for smart contracts and other apps.

What does Ethereum do?

Ethereum can power a number of applications offering a wide range of functions:

Currency: With a cryptocurrency wallet, you can send and receive ether or pay for goods and services, if the digital currency is accepted as payment.

With a cryptocurrency wallet, you can send and receive ether or pay for goods and services, if the digital currency is accepted as payment. Smart contracts: Smart contracts are a kind of permission-less app that automatically executes when the contract’s conditions have been met.

Smart contracts are a kind of permission-less app that automatically executes when the contract’s conditions have been met. Digital apps, or dapps: Ethereum powers digital apps that allow users to play games, invest, send money, track an investment portfolio, follow social media and more.

Ethereum powers digital apps that allow users to play games, invest, send money, track an investment portfolio, follow social media and more. Non-fungible tokens : These tokens can be powered by Ethereum and can allow artists or others to sell art or other items directly to sellers using smart contracts.

These tokens can be powered by Ethereum and can allow artists or others to sell art or other items directly to sellers using smart contracts. Decentralized finance: By using Ethereum, some people may be able to avoid centralized (government) control over the movement of money or other assets.

Again, it might be more accurate to think of Ethereum as a token that powers various apps rather than as merely a cryptocurrency that allows users to send money to each other.

Where do ether coins come from?

As of August 2021, there were about 117 million ether in existence. And while new coins could be “mined,” the total annual issuance is limited. That contrasts sharply to Bitcoin, where a maximum of 21 million coins can be mined and new issuance becomes harder each year. And it contrasts still further with Dogecoin, where issuance is completely unlimited.

Ether coins and those of other cryptocurrencies are “mined” by the computers on the network. They perform mathematical calculations that effectively unlock coins or fractions of coins.

That setup is changing, however. Both the Bitcoin and Ethereum blockchains use what’s called “proof of work” to mine new coins and validate transactions. It’s an expensive, energy-intensive and time-consuming process that can clog the network. So the minds behind Ethereum have decided to change their system to a “proof of stake” system, which is nicknamed Ethereum 2.0.

The new system makes it difficult for miners to generate new coins. Instead, those who own the currency basically “stake” their own crypto holdings and validate transactions. Stakers could lose their investment if they verify transactions that don’t conform to Ethereum’s rules.

It’s expected that the changeover as well as transaction fees being “burned” – destroyed forever – will lead to fewer ether in existence and a deflationary spiral, causing the crypto to soar.

Bottom line

Speculators can invest in cryptocurrencies such as Ethereum directly, but they can also invest in the companies that may profit from a move toward digital currencies.

Whether you’re trading Ethereum, Bitcoin or any cryptocurrency companies, it’s vital to understand the risks, including the potential loss of your entire investment. Investors should take a measured approach with cryptocurrency, given its volatility and many risks. Those who are looking to get a taste of the action should not invest more than they can afford to lose.

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Editorial Disclaimer: All investors are advised to conduct their own independent research into investment strategies before making an investment decision. In addition, investors are advised that past investment product performance is no guarantee of future price appreciation.