While Bitcoin has seen a stagnant money trend over the past week and only posted marginal gains of just 3%, its crypto cousin Ether (ETH) appears to be gaining ground not only against the US dollar but also consistently around the threshold hovering from USD 1,300 and now finally surpassing the all-time high of USD 1,428 for a short time.
It’s interesting to note that unlike Bitcoin (BTC), Polkadots DOT and Chainlinks LINK, as well as a host of other decent sized altcoins, ETH is one of the few premium digital assets that hasn’t topped its ATH over the course of the year this current one Bull cycle. According to some, the currency’s macroeconomic trending outlook looks “ridiculously bullish”. If the currency is able to close above its previous ATH level, a quick move to around $ 2,800-3,200 is touted.
At the end of 2020, the value of ETH was between 500 and 650 US dollars, whereupon an increase of around 100% was recorded within a few days. Ether has been trading at around $ 1,200 for a while. If this “bullish” trend continues and the market is not exposed to serious negative backlash, expect another spike that will push the currency into the $ 2,000-3,000 range.
Another reason for a possible spike in ether in the near future could be that the reserves of crypto on all centralized exchanges have decreased, suggesting that the demand for altcoin is increasing. Data available online show that the ETH’s foreign exchange reserves fell by a whopping 20% from 10 million to 8 million between January 14 and 15. Not only that, according to Glassnode, the ether reserves on centralized exchanges are currently so low that they have not been observed since July 2018.
Why is Ether Leaving Centralized Trading Platforms?
To get a better understanding of why ETH is draining off the exchanges so quickly, Justin Barlow, research analyst for digital asset data provider The Tie, pointed out to Cointelegraph that the ongoing offload could mean ETH is now starting focus on “stronger hands” – that is, players who may not be trying to sell their holdings for instant liquidity, adding:
“This includes funds, token development teams and retail investors. While this is not a clear indicator, this trend is likely to continue as more regulated ways to buy ETH are introduced, such as the Grayscale ETH Trust or the 3iQ ETH Fund with multi-month lock-up periods. “
Nikita Ovchinnik, Chief Business Development Officer at the decentralized stock market aggregator 1inch, believes there are several reasons that can explain this shift and that such a trend is most likely to continue in the future. Ovchinnik stated that more and more crypto investors are realizing that there is no need to hold Ether on exchange wallets in order to sell it as there are a number of DEXs that offer extremely competitive interest rates.
In addition, the incentives that DEXs offer far exceed the incentives currently offered by the centralized exchanges. For example, keeping Ether in DeFi logs enables investors to participate in yield farming, governance, staking, and any other potential routes that enable users to generate significant passive income streams.
In addition, it’s no secret that holding tokens on centralized exchanges has always been a risky endeavor, as even the best trading platforms can suffer hacks and data breaches. On this subject, Ovchinnik said: “DeFi has taken a big step forward from a design point of view and has become extremely user-friendly at this point. This is another reason why institutional investors have become more active in this area. “
Is the incoming ether boom real?
While Bitcoin is clearly still the favorite of the crypto industry, it seems like its price is largely driven by the “strict supply and elastic demand” model. As a result, the currency is becoming a long-term store of value, similar to gold, rather than an ecosystem for technological innovation.
Ethereum, on the other hand, is very different due to its advanced programmable features like smart contracts and therefore appears to act as a Swiss Army knife for crypto coins. On the subject, Sandeep Nailwal, Chief Operating Officer of Matic Network – a blockchain-based scalability platform – told Cointelegraph:
“Ethereum has clearly established itself as THE decentralized execution platform for running the Web3 business logic, be it for decentralized funding or the platform of choice for games and collectibles, also known as NFTs. The huge DeFi wave of 2020 clearly shows that it will be Wall Street of the 21st century, and the platform for implementing those business rules is Ethereum. “
He added that while a number of naysayers continue to bet on the high gas charges, the fact remains that despite the current challenges, people continue to use the network. Nailwal added, “Applications running on Ethereum are valuable enough to their users to pay hundreds of dollars in gas fees.”
Ovchinnik added that Ethereum has the potential to become the Wall Street of the crypto finance sector as it offers a wide range of investment opportunities for various market participants, from arbitrageurs to long-term investors.
While the demand for most crypto assets is currently driven by market speculation, Ethereum appears to be one of the few projects where there is real demand for the token itself. The simplest example is gas fees, where users use ETH to pay about $ 7 million in gas fees alone. In addition, ETH Pairs are the most widely used in all DEXs, while the altcoin is also the primary asset used for much of all DeFi-based lending and lending activities.
Finally, getting involved in Ethereum 2.0 has also proven very popular, underscored by the fact that nearly $ 3.75 billion is currently tied to the Beacon Chain since it launched last December. By taking advantage of this stakeout option, which requires individuals to invest at least 32 ETH in the currency’s ecosystem, investors can earn rewards in the form of annualized interest on their holdings.
A bright future for ethers?
Earlier this month, when Ether was still trading below $ 1,000, Tyler Winklevoss, co-founder of Gemini cryptocurrency exchange, stated that ETH is by far one of the most “undervalued” cryptocurrencies in the market today, adding that Investors amassing The digital currency is getting a bargain for its money.
Barlow believes that while Tyler and Cameron Winklevoss have high hopes for ETH in the short term, it is still difficult to project ETH’s short term price actions with a high degree of certainty. Barlow added that despite the lack of a hard cap from ETH like Bitcoin’s 21 million cap, it is likely that ETH will continue to see significant demand in 2021.
According to Barlow, the growth trend is likely to accelerate further as the demand for decentralized blockchain applications continues to grow and the overall crypto market sees increasing institutional inflow: “As the second largest crypto by market capitalization, this is only the case. Of course, ETH should see new demand, when institutions begin to look past a ‘crowded’ bitcoin trade. “