Ethereum Crypto’s Rally Keeps Cryptocurrency Market Bullish
In the past two weeks, Ether (ETH), native crypto of Ethereum blockchain, has rallied 75% to hit $400, from $222. Several investors feel that upward thrust seen in Ether is leading the rally in the market and even keeps Bitcoin (BTC) in an uptrend.
Three reasons for Ether rally seems to be DeFi, ETH 2.0 and continuing extended rally in the altcoin market.
From mid-June onwards, the aggregate value of tokens latched in DeFi (decentralized finance) covenants has jumped continuously.
The roll out of covenant focused tokens such as COMP, native crypto of Compound blockchain, caused an increasing demand for DeFi.
Ultimately, users found out a pattern called “yield farming,” representing users who continue to look for higher yields in the DeFi ecosystem and shift from one covenant to anther to realize better gains.
The exponential growth of the DeFi market in a brief period drove several DeFi linked tokens to gain value quickly. Last month, investors seem to have diluted their DeFi tokens and rest of the small market cap altcoins, and shifted back to Bitcoin and Ether.
On August 1, price of Ether hit a 2-year high of $395 on BitMEX but professional traders and analysts cautioned about a likely retracement. As a matter of fact, crypto trader Edward Morra said:
“Yeah, parabola coming out of another parabola is a sight to behold tbh. Also, this isn’t sustainable and will correct. If you are new to this space – buy dips, don’t FOMO at the top.”
A sustained positive aspect that backs the rally of Ether is the expectation for ETH 2.0 upgrade. Later this month, Ethereum core developers anticipate rolling out the final testnet of ETH 2.0 named Medalla.
After Ethereum blockchain gets upgraded to ETH 2.0 protocol, miners will no longer be required to secure the network and any user willing to stake Ether holdings could participate in securing the Ethereum blockchain.
The reward system would facilitate users to get paid on the basis of Ether holdings being staked. Of late, Kelvin Koh, co-founder of venture capital Spartan Black, stated that all stages of Ether would play a role in strengthening Ethereum blockchain.
“Every phase of ETH 2.0 over the next 2-3 years brings Ethereum closer to its final state and will be catalysts for ETH.”
— Alex Krüger (@krugermacro) July 31, 2020
Notably, Ether and Bitcoin rallied in tandem for the past two days, but altcoins continued to decline. In the short-term, profit booking cycle could continue if altcoins maintain the uptrend.
In earlier rallies, top cryptos and small altcoins demonstrated an inverse correlation, implying that Bitcoin’s price surged when altcoin prices declined.
The converse is also right when the price of Bitcoin remains stable or consolidating after a run up. This develops into a cycle enabling ETH and BTC to gain from several profit booking rallies.
A well-known cryptocurrency trader, named Satoshi Flipper, stated that in the months ahead Ether will face heavy resistance at $780.
Only time will tell whether the convergence of ETH 2.0, DeFi’s rise and profit booking rallies could take Ether’s price to next resistance levels.
Next major resistance for $ETH is $780, a 110% move from here
Just saying 🙂 pic.twitter.com/j44LkhZTM5
— Satoshi Flipper (@SatoshiFlipper) August 1, 2020
Currently, the sentiment surrounding altcoins normally stays positive in the mid-term.