After Bitcoin’s strong burst above $15,000, analysts are looking to Ether as market sentiment around Ethereum strengthens.
The price of Bitcoin (BTC) is approaching $16,000 after reaching $15,960 at Binance. Following the rebound in the dominant cryptomone currency, analysts are now looking to Ether (ETH). The native token of the Ethereum Blockchain has seen greater momentum in the last week. After a poor performance against BTC in October, the likelihood of a further recovery for ETH is beginning to rise.
There are two key reasons why analysts expect Ether to perform strongly in the short term. First, Bitcoin’s market capital could move towards ETH after the announcement of Ethereum 2.0. Secondly, ETH has recently tested a critical resistance level, which increases the chances of a wider rally. Given that the altcoin market has historically recovered after an initial Bitcoin rally, the timing of an upward trend for ETH is ideal.
Capital to move from Bitcoin to Ether?
Since October 21st, the price of Bitcoin has risen by around 33%. It broke into major resistance areas, one after another, starting at $13,000. When Bitcoin initially exceeded $13,000, large whale aggregations formed at that level. It showed that the whales began to actively accumulate BTC, causing $13,000 to become a buffer zone.
After BTC claimed the $13,000 as a support level for the first time since July 2019, it continued to rise. Over time, it confirmed $13,500 as the next level of support, followed by $14,000 and, more recently, $15,000. When Bitcoin began to rise, analysts said it was negative for altcoins, as it began to absorb most of the crypto market volume. As a result, as Bitcoin recovered, many altcoins fell in value against both Bitcoin and the US dollar.
The overwhelming strength of Bitcoin from October to early November seriously affected the altcoin market, but Bitcoin’s price action has shown that upward market sentiment around cryptosystems has returned. Therefore, a clean break above $15,000 could cause more capital to be diverted into riskier plays, including Ether.
Denis Vinokourov, head of research at the exchange and Bequant broker, told Cointelegraph that Bitcoin capital could flow into the Ether and the Ethereum ecosystem. In the last 48 hours, the DeFi market has behaved particularly strongly after stagnating since early September.
DeFi tokens such as Yearn.finance’s YFI and Uniswap’s UNI increased by almost 30% after the Ether’s abrupt recovery. Vinokourov therefore stressed that the wider ecosystem of the Ether could soon benefit from the Bitcoin rally:
„All eyes can be on Bitcoin and the increase beyond the $15,000 level. However, the recent update on the development related to Ethereum may result in some of the capital being shifted back to Ethereum and its wider ecosystem“. This doesn’t mean that Bitcoin will be actively sold, but the trend of blocking Bitcoin Billionaire on the Ethereum network can be accelerated and put to work through oversold DeFi and DEX tokens such as Uniswap.
On Ether’s historical tendency to shoot up after a Bitcoin rally, traders have said that Ether could soon go up against Bitcoin. Michaël van de Poppe, a full-time trader at the Amsterdam Stock Exchange, said the ETH/BTC trading pair has reached a significant support area. Van de Poppe said, „It took years, but $ETH reached the 0.026 area that we’ve been discussing a lot,“ referring to it as a large support area for ETH.
The launch of Ethereum 2.0 plays its part
The launch of Ethereum 2.0 in the imminent future is fundamental to Ether’s momentum, as updating the network would significantly increase ETH’s transaction capacity. This would allow the new DeFi cycle, if it emerges, to last for a long period because it would reduce the risk of network bottlenecks and high transaction rates. Since Ethereum 2.0 supports staking, allowing users to allocate 32 ETHs to the network in exchange for incentives, it could decrease ETH’s circulating supply in the exchanges.
According to Ethereum co-founder Vitalik Buterin’s blog post entitled „Why Proof of Stake“, Ethereum staking will reward users with a 15% return. Because the rate of return is based on ETH’s shares and not on the US dollar, if ETH’s price continues to increase, then the incentives for staking increase. As such, analysts expect more investors to accumulate ETH for staking, which would decrease selling pressure on it.
The market and community have anticipated Ethereum 2.0 for several years, but challenges have delayed its launch. Ethereum 2.0 has required several test networks with a huge amount of testing due to the complexity of the upgrade. The developers of Ethereum 2.0 wrote on the Github page of the Medal testing network:
„Before such a core network can be launched, we need test networks that mimic the conditions of the core network as best as possible. This requires that we have stable, long-term, persistent test networks in place that are supported not just by one client but by multiple clients, ideally all clients“.
The sentiment around Ether has become increasingly bullish because the launch of Ethereum 2.0 coincides with several favourable catalysts for ETH. A pseudonymous crypto-currency trader known as „Loma“ pointed to the fact that Ethereum 2.0 will remove about $1 billion from the market. While supply is falling, Bitcoin’s rebound is returning significant capital to crypto-currency, as the ETH/BTC trading pair is forming a bottom line.
The excitement around Ethereum 2.0 has intensified after Buterin’s personal wallet sent 3,200 ETH to an Ethereum 2.0 deposit address. According to the official Ethereum 2.0 launch notes from coordinator Danny Ryan, if there are 16,384 deposits from 32 ETHs seven days before December 1st, the Ethereum 2.0 update can begin. After years of research, testing and implementation, there is finally a deadline for the launch.
The approaching confluence of Ethereum 2.0, which would benefit the entire Ethereum and DeFi ecosystem in terms of scaling, and the strength of the ETH/BTC commercial pair makes a rebound in November and December more likely. It is also reported that ETH rose significantly in January 2018 to an all-time high of $1,419, almost a month after BTC reached its all-time high of $20,000.