As a period of correction continues, experts believe that Ether will most likely be faced with volatility in coming few weeks.
- Despite ETH showcasing a minor slide in value yesterday, the currency’s fundamentals have remained strong.
- Ether’s ‘Realized Correlation’ with BTC has plunged to its lowest levels, which seems to suggest that the crypto may be coming into its own as an independent asset.
- If Ether is able to weather the ongoing sell-off storm, it may once again be heading towards its previous target of $1,300
The crypto market is known for its volatility and over the course of the last 24-hours investors got a taste of just that, with Ether’s value dipping from $1,145 to $1000.96, only to recover once again and sit at around the $1050 mark. As a result, the premium altcoin is now showcasing an average seven-day loss of -5.5%.
To get a better read as to what these recent price movements may be indicating, Finder reached out to Nikita Ovchinnik, CBDO for 1inch, a decentralized exchange aggregator whose total trade volume recently surpassed the $10 billion mark. In his view, it was natural for the market to face some level of correction and that the recent dumps should not be taken as a sign that a change in the long-term bullish outlook of the industry may be incoming. He further added:
“From my point of view, it would be hard for digital assets to continue growing in the next few months. Institutional investors will take time to diversify portfolios, minimize their risks, and re-analyze the market from the current valuation point of view. I don’t expect major corrections, but a reasonable decline is very likely. However, this is a normal cycle of things that has to happen to lead digital assets to their success in 2021.”
Making it absolutely clear that his comments are not to be taken as financial advice, Ovchinnik added that from an investment standpoint, Ethereum is still one of the “most undervalued assets” in the market today and he expects it to soar to new heights in the coming 12 months. Furthermore, he believes the premium altcoin’s volatility will continue to decline due to a number of fundamental factors, adding: “Ethereum 2.0 staking will keep a significant amount of tokens locked and current DeFi algorithms heavily reward ETH users through liquidity mining programs making it extremely profitable for them to store coins for the on-chain usage instead of short-term gains.”
Similarly, providing his take on ETHs recent volatility, Shane Ai, Product R&D for cryptocurrency exchange Bybit, told Finder that the recent correction was more a function of over-leveraged longs being cleaned out — as exhibited by swap funding rates somewhat calming down after the dip. Not only that, he also pointed out that ETH prices have decoupled from BTC quite significantly in recent weeks, pointing out: “1M ETH-BTC Realized Correlation has plunged below 50% from 80% as seen in December 2020.”
He also believes that an increasing amount of stability will be showcased by Ether as well as the crypto market at large, especially as the industry goes through a phase of “price discovery” for the DeFi sector; whether that is towards the up or downside remains to be seen.
Ether’s technicals are strong as is institutional interest in the asset
Since the end of December last year, the price of ETH has risen by nearly 80%, thus it stands to reason that a correction after such a drastic upswing was only natural. In this regard, Ekaterina Veber, an analyst for cryptocurrency exchange KickEX, told Finder that in the near future it is possible to ETH may find support around the 800 – $ 850 range or consolidate above its current resistance of $ 1,150 – $ 1,175, as a result of which the currency may once again start moving towards it previous target of around $1,300.
Also, it is worth noting that back in 2017, crypto margin and derivatives trading were not really a thing, however, as things stand, Veber believes that the fixing of positions may have led to the liquidation of margin and futures positions leading to ETHs latest dip. She further added:
“With the development of margin trading and the presence of futures and options, we should expect increased volatility on such a popular instrument as Ethereum. The global stabilization of Ether is possible only with a very large influx of liquidity, the presence of a large percentage of serious players on this instrument and the worldwide adoption of cryptocurrency.”
On the subject of “serious players” entering this space, Quinten Francois, an independent analyst and host of the YouTube channel Young And Investing, believes that ETH has already caught the interest of institutional investors in 2020, pointing to the rising assets under management at Grayscale Trust, who currently own well over 2% of all Ether in existence.
Additionally, Francois highlighted that another aspect that clearly showcases Ether’s future growth potential is the fact that an overwhelming majority of developers are choosing the currency’s ecosystem for their development activities in favor of other existing options, adding: “Everything is happening on Ethereum, including DeFi for which it’s even more important to be connected to other DeFi products. Ethereum is dominating DeFi and other emerging markets such as NFT’s as well”
What lies ahead for Ether?
While it may be anyone’s best guess as to what the future holds for Ethereum, there are a few directions that one can look towards in order to estimate where the second-largest crypto by total market capitalization may be heading. For example, analysts at JP Morgan have speculated bitcoin’s price could hit around $146,000, which in turn could propel Ether to new heights. Providing his thoughts on the subject, Marshall Hayner, CEO of blockchain-based payments Metal Pay, opined:
“It’s hard to predict ETH’s ceiling, but we can look to a few hints. Messari reported that ETH’s price has grown 471% while BTC’ price has only grown 302%. Making an educated assumption on ETH in 2021 requires evaluating DeFi’s brief history and potentially bright future now that this ecosystem has been established.”
That being said, the Ethereum ecosystem has its own set of limitations at the moment. For starters, high gas fees is an issue that has plagued the network for a long time now with there being no resolution in sight for the problem. Similarly, scalability is another pertinent issue that needs to be ironed out, however, it remains to be seen how well ETH 2.0 tackles this aspect since a lack of technical innovation in this regard could lead users to rapidly move towards scalability-oriented platforms such as COSMOS, EOS, etc.
Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, see how to keep your crypto safe with our end to end guide to cryptocurrency security and dive deeper with our simple guide to DeFi.
Disclosure: The author owns a range of cryptocurrencies at the time of writing
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