Afterwards reaching an all-time high of more than $1,400 in January. The price of Ethereum has lost around 60% and was last trading at $515.
What does this mean for Ethereum investors? Hold or exit?
Here are 6 factors to help you make sense of it:
- The fundamental story for both Bitcoin and Ether remains strong with each gaining adoption. As a means to exchange goods and services as well as a store of value.
- Ethereum is still way below its all-time high despite the recent pullback. So there’s more upside potential than downside risk.
- As with Bitcoin, the coin is down because China has been banning ICOs and trading of cryptocurrencies by fiat. However, the Ethereum community remain optimistic and are still doggedly working to make Ethereum mainstream.
- The primary difference between Bitcoin and Ethereum is that Ether doesn’t have a currency feature as part of its protocol. This makes it possible for new applications to be built. On top of the system using custom tokens (Ethermint) or established protocols such as Mijin. Also, Ethereum allows transactions to occur between two parties without requiring a third party like a bank or credit card processor.
- The Ethereum community is not as polarized on the scaling issue as the Bitcoin community. They are working on developing a solution to enable more transactions per second which may be rolled out anytime soon. This could pave the way for Ether to scale to thousands of transactions per second and compete with Visa, MasterCard and Paypal.
- Given these factors, I think it’s worth HOLDING Ethereum at these levels given that it can act as a hedge against uncertainty in the crypto space due to its robust fundamental story and potential to scale much higher in terms of transaction per seconds than Bitcoin.
What are Ether and Ethereum?
Ether or ETH is the native token of the Ethereum blockchain. Ethereum was created by Vitalik Buterin in 2013 as a platform for smart contracts. Think of it as an operating system on which new applications can be built and run. Also, think of ETH as fuel for the network and pay to complete transactions on the network like how you use fiat currency to pay bank charges and utility bills.
What are tokens?
Tokens are like mini-applications which can be built on top of Ethereum, each with their own set of functionalities, features, purpose and benefit to their users. Think of them as apps on your smartphone.
What is Ethermint?
Ethermint is the implementation of Ethereum written in Erlang which uses Proof of Authority (PoA) rather than Proof of Work (PoW) to mine blocks and validate transactions. The main benefit? Energy efficiency, better scalability and faster transaction times. Think of it as a car that can go up to 200 miles on a gallon of gasoline. PoW is the current consensus algorithm for Bitcoin and Ethereum which requires miners to expend computing power to solve complex mathematical puzzles in order to maintain the network’s security and confirm transactions.
ETH price seeks upside
We’ve been bearish on Ethereum because it broke below the level of $400 after forming a double top at $420. Our previous ETH price forecast remained in effect:
“Ethereum price is bearish below $420 because Ether failed to break out of the resistance at $420 and fell to a low of $405. While the support at $406 held, it also failed to pick up momentum above the 20-day EMA and Technical indicators fell sharply, suggesting a sell-off may be incoming. Note that this was partly due to Ether’s plunge against Bitcoin which reached a 2-month low of 0.070BTC today. ALSO, the ETHBTC price is now below our buy zone at 0.075BTC.”
Apart from the resistance at $420, I also expect ETH/USD to hold above $400 given that MACD and RSI are flat with no indication of a reversal so far. However, I want to reiterate my call for Ether to stay above $400 given its innate value as a means of exchange and store of value as well as its potential to scale much higher in terms of transaction per second than Bitcoin.
Ether to scale higher?
There’s been a lot of hype about Ethereum scaling to thousands of transactions per second. The current network can handle only 15 transactions per second and the more transactions which are transacted on the network, the more energy-intensive it is. However, some new protocols which have been developed in conjunction with Ethereum’s protocol such as Mijin (sold to J P Morgan) are in the works and could potentially enable faster transaction times on the network. In addition, there’s also a proposal to go back to Proof-of-Work (PoW) instead of Proof-of-Authority (PoA).
