This essay analyzes Ethereum’s latest drop due to wider crypto worries and offers investors a risk-adjusted conclusion. Bitcoin and Ethereum’s market value and performance have declined compared to BTC.
Fortunately, larger crypto concerns accidentally caused Ethereum to crash last week. Last week, blame was being assigned in all directions. Is there a better moment to buy, sell, or hold off on Ethereum (CCC:ETH-USD), a cryptocurrency asset? Let’s examine what’s occurring both off and on the coin’s price chart, and then we’ll provide a risk-adjusted conclusion that is in line with those discoveries.
Investors are surely aware of the huge decline in the price of Bitcoin (CCC:BTC-USD) that occurred this past week, unless you’re still accessing your e-Trade account using AOL’s browser and dial-up internet. The largest digital asset in terms of size disintegrated by 25%, causing its valuation to sharply decline down below $1 trillion and approach $700 billion.
For many modern cryptocurrency investors, or rather, those committed to overreaching within Ethereum’s momentum trade, the selloff in ETH, the second-largest digital asset on the crypto market, proved to be more damaging.
ETH is the second-largest coin on the crypto market, with a market worth of about $275 billion. Of course, it will be some time before Ethereum matches the much higher worth of Bitcoin. However, the stunning 200% gain this year and the nearly 10-fold performance of BTC are astounding.
More impressive? The price of Ethereum increased after a larger than expected 60% price fall from its peak in May.
Drivers and Short-Term Blinders in Ethereum
So what is going on in ETH? Several reasons influenced the price movement last week, according to the pessimists. The Chinese government hinted at a crackdown on financial institutions’ use of cryptocurrencies. Without a doubt, the news caused the most problems last week for digital assets of all shapes and sizes.
Concerns over potential U.S. regulatory action in the wake of the Colonial pipeline extortion and ransom-taking criminals who are only too glad to accept non-traceable cryptos as payment were another obstacle for Ethereum and other cryptocurrencies.
The Tesla (NASDAQ:TSLA) news wasn’t much better either. Elon Musk, the company’s frontman, has vowed to stop accepting Bitcoin as a form of payment because of its infamously high carbon footprint. It is a well-known fact that the energy required to maintain the BTC blockchain exceeds Sweden’s annual energy consumption. Ethereum is currently less of a grid hog, but its energy needs are still comparable to those of Romania.
Remember Dogecoin (CCC:DOGE-USD) and its canary-like warning to the bigger crypto market while we’re talking about Elon Musk? Despite being created as and continuing to be primarily a joke, the price of the meme cryptocurrency is an astounding $43 billion. Elon Musk has also been a shameless and relentless tweeting advocate for the highly speculative coin.
In the end, DOGE represents the kind of irrational speculative excess that frequently bites back when the outlook for a market changes. However, it seems increasingly likely that ETH still has its finest days ahead of it.
Sorting the Wheat from the Chaff in ETH
Ethereum stands out in terms of increasing utility value for decentralized finance (DeFi) applications thanks to its superior blockchain ledger technology. While one billionaire promotes adorable DOGE memes on Twitter, Mark Cuban, an outspoken businessman and astute investor, attributes ETH with having the strongest functionality and smart contracts in the cryptocurrency space, which will ultimately eclipse Bitcoin’s utility.
Without the need for memes or emoticons, Cuban’s opinions speak for themselves. And there’s more reason for ETH investors to be optimistic as Ethereum switches from its energy-guzzling “proof of work” system to a substitute “proof of stake” system, which may cut its energy usage by as much as 99.95%. There is also more.
Fast-expanding non-fungible tokens (NFTs) that are unique and non-fungible and make use of ETH’s technology are another major driver for Ethereum. NFTs, broadly speaking, are distinctive digital assets made up of audio, video, and other media that are stored on the Ethereum blockchain. Visualize digital art.
NFTs increase Ether token demand. Already happening. With big names like the NBA and the New York Stock Exchange selling NFT trading cards and celebrated IPOs, and investors liking what they see, digitally of course, and paying upwards of tens of millions of dollars for those rights, 2021 has been a successful year for ETH investors.
