Summary
- Delayed ETH 2.0 rollout may result in further losses.
- The DeFi and NFT segments hold the key to growth but are under pressure from other altcoins.
ETH’s Price fell by 1.2% today to trade at $1,787 at the time of going to press. This seemed like a farfetched attempt to get to the $1,900 territory reached during the weekend rally. The cryptocurrency is 1.5% lower than it was a week ago.
The heavy burden on Ethereum 2.0
Ethereum 2.0 is to operate under the proof-of-stake network, which is set to replace the proof-of-work network. This is expected to significantly improve efficiency in the Ethereum ecosystem, and developers are angling to speed up the transition.
Ethereum’s main undoing seems to be the delayed switch to the proof-of-stake network. Ethereum’s smart contract and NFT competitors, Cardano and Polkadot, have grabbed the opportunity to sway clients to their side.
While Ethereum 2.0 promises to reduce gas charges, it is still at the testing stages. It is, therefore, likely that Ethereum will lose a portion of its market share to its competitors before users can plug into Ethereum 2.0.
Promising institutional affinity
Institutional interest in Ether is an invaluable aspect of its growth trajectory. As of Monday, JPMorgan was reported to have been searching for a crypto clearinghouse. The move signals an increasing demand for the institutional acquisition of Ethereum and other cryptocurrencies, considering the reason given was to boost liquidity.
JP Morgan has been one of the leading institutional investors in Ethereum, with its Quorum Coin built on the Ethereum blockchain.
In another development, Olsztyn, a city in Poland’s Warmian and Masurian region, has recently invested in the Ethereum blockchain in its operations. The municipal authorities will use the Ethereum network to improve the city’s administrative and operational functions in the emergency services and tourism sector.
The NFT and DeFi Strongholds
Decentralized Finance (DeFi) will be a key determinant of price movements in the long term. The segment is Ethereum’s stronghold in the crypto market, despite only 3.55% or 1.6 million active ETH wallets interacting with DeFi. Currently, about 80.7% of decentralized applications run on the Ethereum blockchain.
The NFT segment has picked up momentum this year, with sports collectibles and art leading the way in its adoption. Last year’s NFT total trading volume has already been surpassed by February 2021’s figures alone, which stood at $342 million.
Emerging threats
Following emerging concerns over possible sabotage by disgruntled Ethereum miners, the miners have proposed a workable solution to the impasse. They have now proposed an Ethereum Improvement Proposal 3368 (EIP 3368).
The proposal seeks to increase the miner’s block reward to 3 ETH from the current 2 ETH. This will then be reduced to 1 ETH per block in the next two years, during which the miners will have ample time to sell their machines.
Ethereum’s hold on DeFi is coming under increased pressure from Binance Smart Chain (BSC). BSC’s February transactions bettered Ethereum’s, signaling the real threat posed by the latter. According to DappRadder, BSC had a 266% increase in unique active wallets in February, which translates to $745B worth of transaction volume.
In addition, BSC increased its active unique addresses by 78,000 between January and February. On the other hand, Ethereum experienced a reduction over the same period. The changes have been attributed to Ethereum’s high gas prices, which is a disincentive to investors.
Technical analysis
ETH price will find support at $1,737 and will meet the first resistance level at $1,812. Beyond that point, it will find the second resistance at $1,829, and a break past this point could herald another march towards the $1,900s.
