Ethereum Could Soon Plummet 20% Against BTC; Here’s Why
Ethereum has been woefully underperforming Bitcoin over the past few days, with the cryptocurrency’s USD pair fast approaching a crucial “last-ditch” support level could catalyze a massive downtrend – should it be broken below.
The weakness ETH has seen against both USD and BTC has come about despite it incurring massive fundamental growth.
The cryptocurrency has seen its daily transaction volume rocket to its 2017 highs, with the explosively popular DeFi trend directing massive user inflows to the ETH blockchain.
This has created a divergence between Ethereum’s technical and fundamental strength.
Analysts don’t believe that the fundamental growth seen in recent weeks will be enough to stop it from seeing further downside.
One analyst is now calling for a 20% decline against its Bitcoin trading pair.
This weakness could be compounded by a massive influx of tokens into exchange wallets, signaling that investors are prepared to offload their Ethereum holdings if it makes any big near-term movements.
At the time of writing, Ethereum is trading down roughly 1% at its current price of $224. This is around the price level at which it has been trading over the past day.
It has posted a similar loss against its Bitcoin trading pair, currently trading at 0.0245 BTC.
Its decline over the past couple of days has caused it to break firmly below the trading range that it has been caught within over the past several weeks.
This range exists between $230 and $250 on its USD trading pair, and the sustained decline beneath its lower boundary seems to indicate that it may be forming a mid-term downtrend.
Ethereum’s current weakness is also well-pronounced while looking towards its BTC trading pair.
One analyst recently put forth a chart showing that it may soon decline by over 20% due to its posting a rejection at the upper boundary of a triangle formation.
“ETHBTC: Feel free to remind me why my bearish bias on ETH over the last several weeks will be wrong?”
Image Courtesy of TraderXO. Chart via TradingView
One data analyst recently observed that cryptocurrency exchange Bitfinex had seen a massive rise in the amount of Ethereum on the platform.
This seems to indicate that traders are taking short-term positions on ETH, with a goal of exiting their positions should it push any higher in the near-term.
“So Bitfinex now holds nearly double the USD balance of $ETH vs. $BTC. Two completely opposite trends this year. $1B of bitcoin outflow.”
Image Courtesy of Ceteris Paribus.
Ethereum On-Chain Data is Bursting, Sell-Off Cancelled?
Ethereum is exploding with usage; can ETH price follow?
- Activity on the Ethereum blockchain is nearing levels not seen since the peak of the ICO bubble.
- ETH withdrawn from exchanges hit a six-month high.
- It’s tough to decipher if ETH is being moved from exchanges to cold storage or to DeFi protocols.
Ethereum network data is hitting levels not seen since the ICO mania of 2017. Is this a sustainable rally, or is ETH price in for a spell of pain?
Although DeFi’s growth over the last year has been phenomenal, nothing compares to the surge in activity last month.
With DEXes facilitating record-breaking volumes and yield farming bringing in a slew of new users, the sector is causing an activity boom on Ethereum.
Transaction volume on the Ethereum blockchain is at a 2.5 year high as it gradually catches up to the all-time high set during the euphoria of the ICO boom.
This has caused transaction fees on Ethereum to sustain at unprecedented levels. A part of this volume comes from miners attempting to boost their revenues with spam transactions that raise the cost of doing business on Ethereum.
Alongside transaction volumes, daily active addresses interacting with the network is also at a 2.5 year high of 492,000.
This goes hand-in-hand with the rise in unique DeFi users. While Ethereum can cater to an array of use cases, DeFi has been the primary motor for Ethereum’s growth thus far.
But as Bitcoin’s price action starts to look shaky, analysts are calling for a market correction. Ethereum’s exchange data, however, could contradict this view.
ETH on exchanges is back at pre-Black Thursday levels, with over a million ETH leaving centralized exchanges.
The most basic interpretation of coins leaving centralized exchanges is that they are being moved to cold storage to be HODL-ed. But given the recent surge in DeFi activity, one can also assume that some of these coins are being taken off centralized exchanges and moved to DeFi protocols.
It’s difficult to deduce whether this is bullish or bearish for ETH price since these investors can also offload their ETH through DEXes. However, there is strength to the theory that ETH is decoupling from BTC as it finds unique utility in the crypto market.
On the contrary, whenever usage levels are caught in an exhilarating uptrend, they tend to come back down to Earth.
Author: Published 6 hours ago
Ethereum Developers Consider New Fee Model as Gas Costs Climb
- Demand to transact on the Ethereum blockchain has pushed fees to uncomfortable levels.
- A new technical proposal helps address high fees by implementing a dynamic pricing system.
- Called EIP 1559, Ethereum users would now pay a set “base fee” to the network plus a tip to miners.
- One technical observer calls it “the biggest change to any blockchain post-release.”
The cost to use Ethereum has increased some 500% since April. That’s not very helpful for people running programs on it.
And while average gas fees are not at the all-time highs seen in July 2018, the problem will need fixing if decentralized applications (dapps) can be run reliably on the world’s leading smart-contract blockchain.
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A potential technical savior is on the horizon, however – and it’s not the Eth 2.0 overhaul or Rollups, the latest en vogue scaling solution.
Called Ethereum Improvement Proposal (EIP) 1559, this proposed update aims to reduce transaction costs by overhauling the network’s fee market in what independent analyst Hasu describes as “the biggest change to any blockchain post-release.”
Some Ethereum clients, the teams that maintain the blockchain’s software in various programming languages, are already working on implementations.
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Introduced in April 2019, EIP 1559 has roots going back to an August 2018 paper on Ethereum’s price-auction model penned by Ethereum co-founder Vitalik Buterin. The EIP itself was co-authored by Buterin, in addition to Ethereum developers Eric Conner, Rick Dudley, Matthew Slipper and Ian Norden.
EIP 1559 tries to solve fee pressure by implementing “algorithmic price discovery,” according to Ethereum Foundation researcher Barnabé Monnot in a technical deep dive.
The EIP solves two problems at once by dynamically changing the size of blocks depending on the number of transactions in the queue between certain thresholds and by pricing out certain users when demand gets too high.
This is accomplished in two parts: a burnt base fee (BASEFEE) for transacting and a tip to miners.
The base fee will reside at a set level, depending on network conditions, while the tip compensates miners for their work and can be increased to “skip” the transaction line – a nice feature of current blockchain networks that helps alleviate congestion.
Think of it like a regulated highway that can open and close lanes as needed. Plus, there’s a fast-pass lane someone can pay for if they need to scoot in an emergency.
The configuration also helps during moments of bottleneck where it’s near impossible to settle a transaction. To date, this has happened twice: once with the rise of CryptoKitties in 2017 and more recently, on March 12 (or “Black Thursday”) when the price of ether (ETH) dropped by more than 30% in 24 hours, creating a mad dash to exit various Ethereum-based applications.
Not everyone wants to throw the baby out with the bathwater. Etheruem has a fee problem, but that doesn’t mean you have to dump the current model entirely.
EIP 2593, written by MetaMask developer Dan Finlay, proposes an “escalator algorithm” that allows users to change their fee structure based on their relative needs. In short, the EIP lets a user fine-tune a transaction fee to the lowest amount possible by slowly escalating the transaction fee until a miner decides to incorporate it into the next block. (A more thorough breakdown of EIP 2593’s pros and cons can be found here.)
Ethereum developers liked the idea – so much so, in fact, that the EIP is likely to be used in addition to EIP 1559 as a tweak to the latter’s “tipping” feature. As of June 24, developers have decided to launch a testnet to help model the effects of EIP 1559 and any other tangential work on the network.
As Hasu, the pseudonymous blockchain researcher, states, those effects could be far-reaching.
While miners are currently rewarded in ETH for processing transactions via a block reward and transaction fee, nothing makes the denomination of that fee specific to ETH. For instance, a team could reach out to a mining pool and pay them in fiat to route their orders first.
Notably, EIP 1559 forces Ethereum transactions to be paid in the blockchain’s native token. The base fee is denominated in ETH, paid to the network and then burnt every time a transaction occurs, which also decreases the outstanding supply of ether over the long run.
(At some point, Ethereum will not pay mining rewards at all, once the network switches to the Proof-of-Stake [PoS] consensus algorithm in the mother-of-all network updates known as Eth 2.0. The current network, Eth 1.x, will run adjacent to Eth 2.0 for a number of years until the PoS chain is fully functional.)
Consequently, the burning also provides a new deflationary pressure into Etheruem’s economic model, a pressure some argue would give the network a higher value proposition in the long term.
Practically speaking, miners may have the most to lose from the proposal. Hefty transaction fees – such as one alleged Ponzi scheme that sent a few multimillion-dollar fees by “accident” – are unlikely to occur under the new system, which prioritizes user experience over miner pocketbooks.
“It is better for users since the base fee will become a constant, and that’s something users will no longer have to worry about when sending a TX [transaction],” MyEtherWallet CEO and founder Kosala Hemachandra said in an email. “They don’t have to know how congested the network is, or when their TX will be mined.”
Yet, intuition may not be a valuable guide. Mining pools operate under the assumption of long-term block rewards, making them less worried about any programmatic changes than initial thought would suppose.
“Maximizing every block reward is important to mining pools, including SparkPool. However, I think making the Ethereum network a better network is prioritized [over] maximizing every block reward to SparkPool and I,” Xu said.
- Ethereum Developers Consider New Fee Model as Gas Costs Climb
- Ethereum Developers Consider New Fee Model as Gas Costs Climb
Author: William Foxley