What Is Ethereum And How Does It Work?

What Is Ethereum And How Does It Work?

The Ethereum network can also be used to store data and run decentralized applications. Rather than hosting software on a server owned and operated by Google or Amazon, where the one company controls the data, people can host applications on the Ethereum blockchain. This gives users control over their data and they have open use of the app as there’s no central authority managing everything.

Perhaps one of the most intriguing use cases involving Ether and Ethereum are self-executing contracts, or so-called smart contracts. Like any other contract, two parties make an agreement about the delivery of goods or services in the future. Unlike conventional contracts, lawyers aren’t necessary: The parties code the contract on the Ethereum blockchain, and once the conditions of the contract are met, it self-executes and delivers Ether to the appropriate party.

Ethereum vs Bitcoin

Bitcoin’s primary use is as a virtual currency and store of value. Ether also works as a virtual currency and store of value, but the decentralized Ethereum network makes it possible to create and run applications, smart contracts and other transactions on the network. Bitcoin doesn’t offer these functions. It’s only used as a currency and store of value.

Ethereum Price Prediction: ETH struggles to establish clear trend

Ethereum price is nearing the lower trend line of a massive ascending parallel channel.

Although a bounce seems likely and logical, ETH might not witness this move due to stacked resistance barriers ahead.

A breakdown of the support level at $1,513 will indicate the start of a downtrend.

Ethereum price is treading dangerously close to the lower boundary of a technical formation. A breakout from this level could spell disaster for ETH.

Ethereum price at make-or-break point

Ethereum price has traded within the confines of an ascending parallel channel for over two months. Within this period, ETH created two higher highs and four higher lows.

Although a breakout from the lower trend line of the setup is bearish, ETH bulls seem to have defended the latest retest. Now, a bounce seems likely for the smart contracts platform token.

If the bull rally continues, Ethereum price could see a 55% upswing toward the 127.2% Fibonacci extension level at $2,500. However, this upswing will be anything but manageable due to the multitude of supply barriers present between the current price and the target.

To confirm a solid bullish momentum, a decisive close above $1,744 coinciding with the 78.6% Fibonacci retracement level and the Momentum Reversal Indicator’s State Trend Resistance at $1,818 is necessary.

A successful and sustained climb above these levels suggests that Ethereum price is ready for the next leg up.

ETH/USD 12-hour chart

Adding credibility to this upswing is the stark decrease in the number of daily active deposits. A 21% decrease in this metric suggests that investors are done booking profits, at least for now. Hence, this a bullish development for Ethereum price.

Meanwhile, the number of daily active addresses has not seen a massive change. Despite the recent 20% crash, the number of users interacting with the ETH blockchain remains the same, which can be viewed as a bullish sign.

Ethereum Daily Active Addresses and Daily Active Deposit chart

Regardless of the bullish outlook, IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model paints a rather bearish picture for Ethereum price.

The resistance levels are stacked on top of each other, from $1,640 to $1,784. In fact, 1.2 million addresses that previously purchased $13.25 million ETH are “Out of the Money.” Therefore, ETH price needs to break past the initial set of resistance zones and then face a cluster of underwater investors to have any chances of surging higher.

Failing to do so will add to the already grim scenario and kickstart a descent.

Ethereum IOMAP chart

To conclude, the Ethereum price seems to be facing Insurmountable odds and could slide 10% lower to $1,360 if the crucial support level at $1,510 is breached.

A key Ethereum signal you should know about

Despite a large number of ETH ‘killers’ and competitors emerging with increasing popularity in Q1 of 2021, demand for ETH is hitting all-time highs, based on activity on top spot exchanges. Based on data from Cryptoquant, all exchanges’ reserves have hit ATL; the reserves have dropped consistently for the past two weeks.

The above chart shows that only about 25% of circulating ETH is currently on exchanges, and this is the equivalent of a supply shock. This drop in ETH reserves may be partially attributed to the increased staking. For the remaining part, it may be attributed to the increasing demand for DeFi tokens and altcoins that do not necessarily rank in the top 20 altcoins. Whales HODLing over 10000 ETH hold over 70% of ETH’s circulating supply.

Currently, there is a lack of indicators signaling a top for ETH. On-chain data from intotheblock signals that sentiment among retail traders is bullish; the daily uptrend is intact. ETH exchange reserves have hit newer all-time lows, a few times in the past week and the funding is currently neutral. Based on these metrics and on-chain analysis, ETH is currently undervalued even above $1600. However, due to the lack of signals at the current price level, it may be premature for the asset to hit a new top.

According to influencers like @AltcoinSherpa on crypto Twitter, it is likely that altcoins will pump in the following weeks and Bitcoin dominance is not the ideal gauge that it was in the previous market cycles. The current ETH/BTC price action suggests that the price may break past the 0.04 level soon, based on price data from coinmarketcap.com.

The price action from the chart shows that the asset is a better gauge of the onset of an alt rally, compared to Bitcoin’s dominance. The recent conversations around Cardano emerging as an ‘ETH killer’ have made headlines enough times to be noticed, and it is critical to evaluate if ADA will lead the alt rally this time around.

However, when the two are compared in scale or market capitalization, ETH emerges as a winner. Besides, the outflow of ETH from exchanges has no clear relationship with Cardano. Cardano’s bullish price action can be attributed to the Shelly upgrade, which emerged as a major dev milestone for the project and increased the demand for ADA on top spot exchanges.

ETH killer or not, Cardano currently may not have enough influence, through community and liquidity to take over the alt rally. Additionally, it is likely that ETH’s bullish breakout past 0.04 BTC may pave the way for an alt rally.