Ethereum has been dealing with some troublesome price trends over the past two years, and it seems that it still has some challenges to face ahead.
- Ethereum has been dealing with a challenging environment over the past two years and didn’t succeed in gaining as much momentum as it had hoped.
- There’s still a possibility of future downsides, but most investors expect gains as well.
- Vitalik Buterin, Ethereum co-founder, deposited 400 ETH in September.
- The Shanghai Upgrade didn’t bring the desired changes, resulting in a stagnation many analysts estimate will end soon.
Ethereum is the second biggest cryptocurrency in the world by market capitalization, second only to Bitcoin. As a result, it has recorded considerable engagement from users looking to buy and add the coins to their portfolios to protect their asset list against inflationary pressures. However, 2022 has been difficult for Ethereum as well, as prices fell by a sizable margin. This changed in January 2023, when values started on an ascending path, and investors began looking into how to buy crypto again.
However, the momentum didn’t last much longer, as regulators and lawmakers began to discuss the possibility of implementing a set of rules for the cryptocurrency environment. This, coupled with the difficult situation experienced by several notable exchanges, has caused considerable apprehension among investors who found it difficult to predict how the market will evolve.
Here are some of the latest developments in the digital money environment that you should be aware of in order to create a sound strategy.
Future downsides
Although Ethereum hasn’t been doing all that great, both investors and analysts currently expect further downsides. Although a couple of months ago, it appeared that the bull market would continue to sustain the momentum, August ushered in negative changes. Around the middle of the month, all cryptocurrencies lost considerable portions of their value and have been struggling to recover ever since.
Ethereum is moving in tandem with Bitcoin, and both have been trading flat for a while now. There’s no sign of buying pressure from whales at the moment, either. The ones with balances exceeding 10,000 have declined over September, moving alongside changes in the price points. Some analysts currently believe that the values will get even lower moving into October, with the bleaker predictions placing the Ethereum price at $1,300.
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Investor mindset
Yet, despite these worrying numbers, most investors have remained dedicated to amassing cryptocurrencies and accumulating capital. The general consensus is that the price will climb back up sooner or later and that it’s essential to be prepared for that moment. Some are so confident that they are certain Ethereum is set to outperform Bitcoin in the future.
Most users are focusing on slow accumulation and growth instead of massive buying. The strategy is considered the most solid, as it seeks to anticipate momentum changes. Some predictions show that a short squeeze is imminent. This happens when many investors bet against a particular asset, but the price shoots up instead of sinking down. The short squeeze acts to fasten the price rise as the sellers leave to cut their losses.
The funding rates seem to work in the investors’ favor as well. These recurring payments are made to traders on the basis of the difference between spot pricing and contract markets. Futures traders have taken a pessimistic view of Ethereum so far, strengthening the possibility of a future price drop. If negative funding remains consistent, it might lead to liquidations and, therefore, a price rebound.
Cashing out
Vitalik Buterin, the Ethereum co-founder, has been making the news recently due to his movement within the blockchain. Buterin has been moving large sums of Ethereum to centralized exchanges, something that has historically been considered indicative of sales preparations. On September 25th, it was reported that he had deposited 400 ETH coins on an exchange. That is the rough equivalent of $632,000.
Although some didn’t pay much attention to the movement, others are certain that it is the precursor to something more significant. On September 22nd, Vitalik Buterin discussed the crypto market as well as the crackdown on exchanges currently taking place in the United States. The conversation took place in Prague, which has gradually become one of the most important places in Europe for cryptocurrencies and their owners.
Talking to technology reporter MacKenzie Sigalos, whose career specializes in fintech and cryptocurrencies, Buterin addressed his belief that emerging economies could benefit from using cryptocurrencies and that they should keep the developments going in spite of the possible impediments. He also believes that Ethereum will remain resilient in the face of regulatory pressures.
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Shanghai Upgrade
Multinational bank JPMorgan, headquartered in New York City and whose history can be traced all the way back to 1799, revealed that the results meant to occur in the aftermath of the Shanghai Upgrade fell short of expectations. In February 2019, the bank indicated that it was planning the launch of a digital token known as JPM Coin. The purpose of this asset was to complete transactions between clients of wholesale payments.
Only institutional clients can use it, but it’s important to remember that the crypto coin is the first of its kind to be officially issued by a US bank. However, despite the fact that JPMorgan has been open to cryptocurrencies, it nonetheless revealed that the April upgrade didn’t increase activity on the blockchain as much as initially anticipated. This negative downtrend has been observed irrespective of the fact that energy consumption rates dropped by a sizable 99%, staking climbed, and the supply was lower.
Since the upgrade, the daily number of transactions fell by 12%, while the number of daily addresses is almost 20% lower. The TVL, total value locked, present in DeFi, also went down by 8%. This metric measures the full value of a digital asset that is locked or staked in decentralized finance, including on dApps. When the TVL records a higher level, it means that the platform is considered to be more trustworthy.
The bottom line
All these factors suggest that bearish tendencies remain strong and that the bulls still have quite a lot of work to do to achieve their goals. JPMorgan also added that the macro context isn’t at all helpful. Apart from the threat posed by the regulatory framework and the uncertainty and apprehension it caused, several exchanges collapsed, leading to considerable capital loss and trouble among the investors. These conditions haven’t been optimal for growth either, which is precisely why Ethereum, alongside Bitcoin and the other altcoins, has remained stagnant over the past months.
Investors must remain vigilant of the changes to prepare for the future and protect their assets.
