There has been a lot of talk about Bitcoin and Ethereum the past few days. Bitcoin surged past $40,000, and Ethereum breached the $1,400 level, both reached their respective all-time highs. Bitcoin underwent a correction, while Ethereum remained strong. Could Ethereum possibly be the next to moon? We explore why this might be the case.
Ethereum Adoption is Growing Fast
There is a reason why Ethereum is the second biggest crypto after Bitcoin. Firstly, it has an enormous amount of crypto locked in decentralized finance or DeFi. According to CoinGecko, it has $16 billion cryptos locked up as of press time, increasing over 2,200% from the $690 million locked at the start of 2020. It is thanks to the DeFi apps that are being built on the Ethereum blockchain.
This takes us to the next point. The total amount of value transferred on the blockchain on Ethereum is higher than Bitcoin. The value moves through the Ethereum blockchain through the many other cryptos built on top of the Ethereum network. This is the power of the network effect. It is the same reason why social networks like Facebook succeed.
If you develop a social network that nobody uses, it is worthless. Similarly, if you create a cryptocurrency that no one is adopting, it will not work or grow in value. Ethereum enables other DeFi apps to be built on top. This created a snowball effect of more people adopting it.
The much anticipated Ethereum 2.0 will solve scalability, speed, and security on the Ethereum blockchain. Ethereum 2.0 will have shard chains. It can then conduct up to 10,000 transactions per second. On the other hand, Ethereum today can support only 30 transactions per second. This caused many delays and network congestion, which will not be the case in Ethereum 2.0. The implementation of shard chains speeds up the network, enabling scale faster as the transactions are managed in parallel chains instead of consecutive ones.
Despite its current delay and congestion issues, we still see many DeFi apps built on top of Ethereum. A quick look at the average cost of transactions on the Ethereum network also reveals that it is at its highest point in history. Yet, the Ethereum blockchain is still being used daily. This means that even if Ethereum’s fees are high and the network is challenging to work with, it is still being used and adopted very quickly.
Institutional Investors are Moving in
In a Bloomberg report, Fundstrat Global says that Ethereum may surge sevenfold to US$10,500. Strategist David Grider’s prediction is based on the popularity of the related Ethereum blockchain for DeFi applications. Ethereum has also made progress toward a network upgrade to process a similar number of transactions as Mastercard and Visa.
This narrative is evident. Institutional investors are taking their positions, signaling that Ethereum is a good investment. “Ether is the best risk/reward investment play in crypto,” Grider wrote. Adding that “blockchain computing may be the future of the cloud. Risks include setbacks for the network upgrade or a crypto bear market”, he said.
Another prominent indicator is the movement of Whales. Whales refer to individuals, entities, or institutions that hold a large amount of cryptocurrency that can manipulate currency valuations. In the data shared by Whale Alert crypto tracker on 22 January 2021, a mammoth amount of Ether has been withdrawn from top-tier exchanges, such as Bitfinex, Binance, and smaller ones – 367,382 coins overall – more than $451 million. Meanwhile, according to a recent analytics report, the ETH balance on crypto exchanges has dropped to a 15-month low. The transfers mostly shifted large ETH lumps from such top exchanges, such as Bitfinex, Binance, and smaller platforms. Some transactions pushed ETH from one anonymous address to another.
On the same day, Santiment – a behavior analytics platform for cryptocurrencies – tweeted that Whales buying at an all-time high is incredibly bullish. Mid-tier traders also profit, although some got burned, as they do not have as much control as the whales. The number of whales is growing, while mid-tier traders are on a decline. Meanwhile, small traders, those with less than 1 Ethereum held, has been steadily increasing over time. Santiment analysts say they do not think the number of Ethereum purchases from small traders will ever grow down.
Ether Burning and Predictable Fees
Currently, all transactions on the Ethereum network are determined via an auction-style system. Users would attach the highest fees to their transactions get them processed the quickest by miners. This system is problematic because it causes high fees during heavy congestion in the network.
CoinDesk reported about EIP 1559 – an Ethereum Improvement Proposal put forward by the project’s co-founder Vitalik Buterin, and developers Eric Corner, Ian Norden Rick Dudley, and Matthew Slipper. The proposal is intended to implement changes to how Ether transaction fees are presented to users and the management of Ethereum’s supply.
“EIP 1559 suggests scrapping the current auction-style fee system in favor of an algorithmically determined base cost, called the “BASEFEE.” The BASEFEE aims to introduce a uniform fee across all Ethereum-centric platforms and services that rises and falls depending on network activity. This means no more fee discrepancies between ERC-20 compatible wallets, protocols, and exchanges. However, the EIP includes users’ option to tip miners should they want their transactions processed faster.
The second function of EIP 1559, and the one that will likely have the most significant impact on Ethereum’s future price, is the introduction of burning Ether. Burning means completely removing tokens from existence, causing a reduction in the circulating supply. EIP 1559 plans to burn the BASEFEE, so the vast majority of the Ether used to process transactions is destroyed as opposed to being given to network validators.” the report added.
When implemented, this will encourage Ether’s steady deflation, which, in turn, should help bolster prices over time. The report adds that EIP is anticipated to go live sometime after the Berlin hard fork, which could be as early as February 2021.
Bitcoin futures are widely traded in the world today. It’s only natural to anticipate that the craze for Ethereum futures will be next. Crypto futures like Bitcoin, Ethereum, or Ripple futures can be traded on Level01, the world’s first DeFi platform with AI-guided derivative trading. Level01 is unlike other traditional centralized trading derivatives platforms in many ways. Level01 makes it easier for anyone to trade, gives them control of their own wallet, and has robust measures to protect its traders from market manipulation.
Ethereum futures offer better liquidity in the market. It is beneficial because it allows investors to hedge spot positions, which reduces overall risk and makes Ethereum a more attractive investment. Trading with Ethereum futures also mean you can take advantage of leverage. Leverage means that you do not need to put up 100% of the contract’s value amount when entering into a trade. You can speculate on Ethereum’s movements with just a fraction of the amount.
Suppose you want to take advantage of Ethereum’s upcoming price movements to the moon. In that case, you must never sell away your Ethereum trade options on the Level01 app.
How to get started trading Ethereum derivatives on Level01
It is easy to set up your Level01 app and will only take a few minutes:
- Visit Google Play Store to download your app.
- Read our Quickstart Guide.
- Set up your wallet here.
- Choose either demo mode or real mode on the Level01 app. If you intend to start trading using the real mode, please purchase your LVX tokens here. Otherwise, try the demo mode. It comes with free 10,000 LVX tokens.
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