Bitcoin and Ethereum On Bullish Streak Heading To Upper End Of Range

]

What Happened: Bitcoin (CRYPTO: BTC) is trading higher over multiple days, coming off a July 21 low of 29296.39 to a peak of over 34,000 Saturday July 24, a move of over 15%. Meanwhile, Ethereum (CRYPTO: ETH) is bouncing off a low of 1717.17 on Wednesday to a peak of over 2180 at the time of publication, up over 25% in four days.

Why It’s Important: The two leading cryptocurrencies have been range bound since a major correction earlier this year. Bitcoin set an all-time high of 64900 on April 21, Ethereum set a record high 4384.43 on May 21. Recent lows set by both are 1700 for Ethereum on June 21, while Bitcoin came down to 28600 on June 22.

In an email, Pankaj Balani, CEO of Delta Exchange tells CoinDesk “For the first time in many weeks we are seeing bullish signs here and expect Bitcoin to head towards the upper end of the $30,000-$40,000 range,”

What’s Next: Data source Skew is reporting that Bitcoin options traders are pricing an 8% chance of the cryptocurrency reaching a new all-time high by the end of the year. Meanwhile the six-month implied volatility has dopped to 80%, a two month low, after peaking at 122% on May 17.

See more from Benzinga

Opinion: Ethereum, the No. 2 behind bitcoin, fights off challengers that offer cheaper and faster blockchains

]

If you are an investor who dabbles in cryptocurrencies, or even are what we in the industry call “crypto-curious,” you know ethereum ETHUSD, -1.24% as the No. 2 cryptocurrency behind bitcoin BTCUSD, +2.60% — and the blockchain imbued with the ability to write self-executing “smart” contracts right into the code underlying a transaction between parties.

What you might not know about is some of the complexities of how the ethereum blockchain functions, its challenges in terms of security, scalability and energy consumption. Ethereum has a market capitalization over $250 billion and at least five times greater than its competitors. But high fees and network congestion have degraded performance and priced certain activity out of the market, providing an opportunity for a variety of competitor blockchains to emerge. Conceived and funded in 2017, these blockchains are now jockeying to make inroads in the smart contract market by providing alternative solutions to some of its problems.

These blockchains, with names that certainly would fit into any horse race (such as Cosmos, Solana and Polkadot) each have their own competitive characteristics that have positioned them well against challenges for ethereum. (Bitcoin, as the first and biggest blockchain, is and may always be the No. 1 with its unrivaled status as “digital gold.”)

A big drawback that ethereum developers are seeking to shore up is that, like with bitcoin, its mining is incredibly energy-intensive. In the “proof of work” (PoW) consensus algorithm currently used by both bitcoin and ethereum, so much computing power is used to solve ever-more complicated equations that the University of Cambridge estimates the annual electricity usage of ethereum to be on par with the country of Ecuador, a country of 17 million people. Bitcoin would be similar to Argentina’s annual energy consumption, according to these calculations.

Other blockchains have addressed this problem by using “proof of stake” (PoS) models in which cryptocurrency is used as collateral to secure activity instead of relying on computations typically carried out at massive data centers. Ethereum is now also speeding in that direction as well and should get there as early as the last quarter this year.

Another technical aspect that is hurting ethereum is congestion, where intense activity runs up transaction fees, known as gas prices. Here, ethereum is a victim of its own success attracting many more users than other competitor blockchains. In a way, it’s like a popular restaurant where patrons find it difficult to get a table.

Still, this has provided a window of opportunity for competitors as users look elsewhere for cheaper and faster alternatives. For instance, Solana, which announced last month a $314 million fundraising round, is much faster and cheaper to use due to its ultra-high scalability.

Congestion is also often created by traders’ bots written to do front-run and back-run ethereum mining transactions in ever-more sophisticated arbitrage activities. But here again, there is evidence that ethereum can stay ahead. There is a newly created research-and-development organization called Flashbots that has been undertaking activities to manage the arbitrage happening on networks, and already gas fees have fallen.

Ethereum has to move carefully to transition from PoW to PoS while its competitors build their proof-of-stake blockchains from scratch. To use another analogy, it is as if ethereum was a plane changing its engines in mid-flight while its competitors took off with the latest model already in place.

Still, ethereum is responding aggressively to keep its smart-contact crown. Ethereum’s developers and proponents are responding by improving the blockchain’s scalability. Initiatives have gained traction in recent months to reduce congestion. Known as “layer 2” solutions because they manage activity away from the base-layer blockchain, these innovations batch transactions in a way that reduces pressure on ethereum to settle transactions so frequently.

As a result of Flashbots and the rapid adoption of these layer 2 solutions such as Polygon, average gas fees decreased by 80% on the ethereum network in the second quarter.

Other ethereum-boosting activities include enacting an upgrade in the next few weeks. EIP-1559, in crypto-speak, is one of the most highly anticipated updates of the network since its launch six years ago. EIP 1559 will change how ethereum miners are paid, with a base rate plus a tip, to better manage network congestion at times of peak demand. It also includes a fee-burning mechanism that will remove ether from circulation — behaving almost like a stock buyback.

If you are just tuning into this as the news begins to hit even mainstream business publications this month, it might all sound very complicated. Just know that this is ethereum moving through some of the fundamental changes to upgrade its system to make it more functional, efficient and secure. It’s possible these efforts will allow it to maintain its position against the challengers. But the coming months will tell.

Ethereum and the challengers

Ethereum has a lot to do to move through its plan, and how this will change the competitive field will be important — and exciting — to watch. If you are interested to see how this plays out through ethereum’s efforts this summer, and then as we move into 2022, when ethereum transitions from PoW to PoS, here are a few blockchains to keep an eye on as this horse race plays out:

Ethereum: It’s the smart contract blockchain of choice. It’s also what is known as the settlement layer. While the blockchain itself is being upgraded, there are a host of other so-called “layer 2” solutions, such as Polygon, Arbitrum, Optimism and so-called “zero-knowledge” based systems that are being released to help with scaling. They manage transactions offline from the ethereum blockchain, roll them up and bring them back to the ethereum blockchain to “settle” the accounts. This expansion of “layer 2s” has shown ethereum’s power, even as these new challenger blockchains also become a force of their own. Watch closely for the continued progress of ethereum, including the EIP-1559 update and toward a PoS model to see if the picture is coming together relatively quickly.

Solana: It offers the highest throughput smart contract platform. Its transaction throughput is orders of magnitude faster than the competition. The competitive advantage of Solana has largely been that it is the cheaper and faster blockchain. This advantage will begin to fade if ethereum manages its updates successfully. Besides, Solana’s weakness is often perceived as its lack of decentralization. Blockchain believers prize decentralization as the way to keep networks secure because it reduces exposure to specific points of vulnerability.

Binance smart chain: It’s similar to Solana — fast and cheap. But more than any other competitor in the race, BSC is criticized for being too centralized because it is controlled by Asia’s dominant crypto exchange Binance. Decentralization is a fundamental element in making blockchains secure because it avoids single points of vulnerability that can be hacked.

Polkadot: It offers a settlement layer, which allows different blockchains to interact in a shared security model. Designed largely by one of the original architects of ethereum, Polkadot provides among the easiest ways for new projects to get a purpose-built blockchain out the door.

Cosmos: Like Polkadot, Cosmos enables developers to build “app-specific” blockchains using a standard software development kit (SDK). Cosmos recently released the interblockchain communication protocol, or IBC, which connects all of the different blockchains in the Cosmos ecosystem.

Tim Ogilvie is the co-founder and CEO of Staked, which provides infrastructure services for institutional investors wanting to earn rewards from blockchain staking.

Data Shows Ethereum Investors Don’t Plan On Selling ETH Until 2022

]

A recent in-house data study suggests that Ethereum investors are holding their investments for the long-term. On-chain metrics collected from glassnode show an increase in the amount of Ethereum staked on the Ethereum 2.0 testnet.

But how does staking Ether relate to investor sentiment? When investors stake their Ether on Ethereum’s proof of stake testnet, they are unable to sell their tokens until Ethereum’s blockchain migrates from proof of work to proof of stake. While there’s no confirmed release date for this transition, it’s likely to launch in 2022.

So, all of the Ether staked won’t be available to sell for the next 6 months or so. With more than 5% of Ethereum’s total supply already staked on Ethereum 2.0, there may be a supply-side shortage of Ether on exchanges.

To see the full report, check out Data Suggests Ethereum Investors Are In For The Long Run, Despite Bearish Price Movements.

See more from Benzinga

follow us