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.

Bitcoin, Ethereum Primed to Rebound Despite Losses

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Key Takeaways Bitcoin has endured an 18% correction over the past two weeks and now sits on top of stable support.

Ethereum whales are slowly reentering the network as a number of new buy signals pop up in the market.

Despite the significant losses incurred recently, it seems that both cryptocurrencies are poised to rebound.

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Sidelined investors appear to be taking advantage of a recent downswing to reenter the crypto market. The sudden spike in buying pressure could help Bitcoin and Ethereum prices recover.

Bitcoin Holds Above Crucial Support

Bitcoin suffered a significant correction after rising to a new all-time high of $61,800 on Mar. 13. Its price dropped by more than 18% to hit a low of $50,300 recently. The downswing appears to have been contained by the 50-day moving average on BTC’s daily chart.

That indicator has played a vital role in Bitcoin’s price performance ever since it became came into play on Oct. 9, 2020. It has held through one of Bitcoin’s most significant retracements since that date, serving as a rebound point that drove prices to record highs.

Now that BTC is once again testing the 50-day moving average, a similar market reaction could occur. Bouncing off this support level could push the market value of Bitcoin toward a new all-time high above $70,000. But to do so, Bitcoin would have to slice through a massive supply barrier that lies ahead.

IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model reveals that the $54,800 level represents a significant area of resistance. Over 1.20 million addresses previously purchased more than 752,000 BTC around this price point.

As such, only a daily candlestick close above this price hurdle will help confirm the optimistic outlook.

It is worth noting that further price appreciation may prove challenging from an on-chain metrics perspective.

Market participants do not seem to be attracted to the current price action, as the number of new daily addresses on the Bitcoin blockchain is plummeting. Roughly 530,000 new addresses joined the network today, representing an 11.80% decline in the past week.

This is a negative sign: network growth is often regarded as one of the most accurate predictors of price. Usually, when the network shrinks for a prolonged period, prices tend to tumble.

If Bitcoin fails to hold above the 50-day moving average, a steeper pullback is likely imminent.

The IOMAP cohorts show that the two most critical support areas underneath this cryptocurrency sit at $49,000 and $46,200. Given the amount of interest around these price points, they may have the ability to prevent BTC from going through a steeper correction.

Ethereum Screams Buy

Ethereum has also incurred losses, falling by 20% since Mar. 13 and dropping to a low of $1,540. This could represent a market bottom as multiple buy signals are popping up across the board.

For instance, the TD Sequential indicator presented a buy signal in the form of a red nine candlestick on ETH’s 12-hour chart. The bullish formation suggests that a spike in demand for Ethereum may see prices rise for one to four candlesticks. But if the upward pressure is strong enough, Ethereum might start a new upward countdown.

The buy signal will be confirmed when a green two candlestick starts trending above a preceding green one candle.

The Market Value to Realized Value (MVRV) index also favors bullish sentiment. This fundamental index measures the average profit or loss of addresses that acquired Ether in the past month. Each time the 30-day MVRV moves below 0%, a bullish impulse tends to follow.

The 30-day MVRV ratio is now hovering at -3.93%, indicating ETH is currently undervalued. The lower the MVRV ratio becomes, the higher the buying pressure behind Ethereum.

While these technical and fundamental indicators turn bullish, large investors appear to be rushing to add more Ether to their portfolios.

Santiment’s holder distribution chart shows that over the past 48 hours, buy orders behind Ethereum have been filled.

The analytics firm recorded a significant spike in the number of addresses with millions of dollars in ETH, colloquially known as “whales.” Addresses holding 10,000 to 100,000 ETH have shot up by nearly 0.60%, and roughly six new whales have joined the network.

The increasing presence of large ETH holders may seem insignificant at first glance. However, when considering that these whales hold between $16 million and $160 million in ETH, the sudden spike in buying pressure can translate into millions of dollars.

If the buying spree continues, ETH may have the ability to advance further and reach a new all-time high of $2,500.

Disclosure: At the time of writing, this author owned Bitcoin and Ethereum.

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Ethereum Price Forecast: What Next for ETH After the Weekend Rally?

The Ethereum price is tilting lower today as investors book profits from their weekend gains. The ETH is trading at $1,692, which is slightly below the weekend high of $1,730. Its market cap has dropped to $195 billion, according to data compiled by Investing.com.

What happened: Ethereum and other digital currencies rallied during the weekend as investors rushed to buy the dip. In total, the digital currency rose by 10% from the Friday low of $1,546 to $1,730.

Still, the Ethereum network is still under pressure as transaction costs continues to rise while the Decentralized Finance industry seems to be peaking. In total, the total value locked (TVL) in the network has dropped to $40.6 billion from an all-time high of $45 billion. Also, the Ethereum network is facing a substantial competition from the likes of Polkadot and Solana. Still, it holds a substantial market share in the application development industry.

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Ethereum price prediction

The four-hour chart shows that the ETH price reached a high of $1,946 on March 13. It then formed a horizontal channel whose support was at $1,723. Last week, it declined to $1,547, the lowest level since March 6.

Today, it is slightly below the lower side of the rectangle pattern. It is along the 25-day and 15-day exponential moving averages (EMA). Further, it is between the second and first support of the Andrews pitchfork tool.

Therefore, the ETH price will remain in a bearish trend so long as it is below the median line of the pitchfork at $1,800.

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