The price of Ether (ETH), Ethereum’s native cryptocurrency, fell more sharply than Bitcoin (BTC) in the recent pullback.
After Coinbase hit an all-time high, the price of Bitcoin fell sharply by over 9% within a few hours. In the same period, Ether corrected over 11% after a market-wide retreat.
The profound correction in Ether is surprising due to the start of the Ethereum 2.0 network upgrade. On December 1st, the Eth2 Beacon Chain was published on the mainnet and marks an important milestone for Ethereum.
What led to Ether’s sharp correction?
Eth2 is a major network upgrade for the Ethereum blockchain that improves scalability and transaction capacity. Before the upgrade, the network could process about 15 transactions per second.
After the upgrade, Ethereum can scale to thousands of transactions per second, possibly more in the long run through sharding.
This is a fundamentally optimistic upgrade for the Ethereum network as it allows decentralized applications to run without the obstacles of scalability. It would also make new decentralized funding cycles more sustainable and make the user experience easier.
The correction in Ether after the Eth2 upgrade could have been expected given the tendency of the market to buy rumors and sell the news. For example, when the Eth2 upgrade was confirmed in late November, the price of Ether also fell from around $ 620.
Still, the 11% drop in the price of Ether surprised many traders in just two hours. The importance of the Eth2 upgrade and the impact it has had likely led the market to look to Ether for more short-term resilience.
Industry executives were also very optimistic about Ethereum’s medium to long-term growth trajectory after the Beacon Chain was released. This is likely to have contributed to the overall positive market sentiment around ETH.
Joseph Lubin, co-creator of Ethereum and founder of ConsenSys, described Eth2 and the evidence of its use as a monumental upgrade. He said:
“The introduction of the # Eth2 Beacon Chain is characteristic of the emerging open source ethos that primarily draws so many people to Ethereum. More than 27,000 validators from around the world are now participating in the new # Eth2 consensus model. Proof of Stake is a monumental improvement on the crypto-economic incentives that are already making Ethereum an automated, objective foundation for trust. Together we are deepening the commitment to building a maximally decentralized network. “
What’s next for ether?
Traders expect a deeper retreat or at least some consolidation in the short term. The futures market took a big hit when BTC fell abruptly, devastating the derivatives market.
A pseudonymous trader named “TraderKoz” said that Ether would become convincing once it consolidates back above $ 620. The USD 561 level remains a major short-term support level for ETH if the pullback continues. The dealer said:
“We’re getting a nice PA forming around Monday’s reach and a nice day of the weekly opening. Wouldn’t be surprised if we could consolidate a bit in the midfield here. I will be interested in more longs once we trade above USD 620. “