Why is Ethereum going up? – Advisor Forbes INDIA

Meta description

The long-awaited Ethereum (ETH) upgrade – commonly referred to as “the merger” and “Ethereum 2.0” – could be the biggest event in the cryptocurrency markets this year.

The final phase of the merger begins in just a few days, as a massive network upgrade of the main altcoin is expected to begin in mid-September.

In preparation, there was a 10% increase in ETH derivatives trading volume during the month of August. The #2 crypto even surpassed Bitcoin in derivatives volume.

Some analysts suspect that the overall supply of Ethereum could decline as a result of the merger, which would increase the value of the cryptocurrency for those who already hold it. These factors led to a lot of volatility and excitement in the days leading up to the Ethereum 2.0 transition. The leading altcoin is up almost 15% in the past five days to around INR 1,30,990.

Why is Ethereum going up?

As the big upgrade approached, the price of Ethereum slowly rose.

Some enthusiasm for ETH centers around the future prospects of the crypto, with investors seeing the token as a buy-and-hold opportunity for future profits.

Ethereum spiked to around INR 1,33,528 in mid-August before pulling back with a brief selloff between August 25 and August 29. ETH prices fell during this period following a few merger-related bugs, as well as the Federal Reserve’s reiteration in Jackson Hole of its plans to fight inflation with higher interest rates. students.

Ethereum’s late summer rally followed its low on June 18, when ETH fell to a 52-week low of around INR 89,499.

Between April and June, ETH fell by more than 70%, plunging below the all-important barrier of INR 79,872 in June.

Bitcoin (BTC) was down just 52% over the same period, hitting a low of around INR 16,91,939 in June. Since then, BTC has recovered around 15% to around INR 15,97,442. ETH is up over 82% from its own low, returning above the INR 127,795 barrier.

Ethereum Merger Price Prediction

The merger has been in the works for years, but no one knows exactly how Ethereum 2.0 will play out for users. Few changes of this magnitude have been attempted in the crypto world before.

The merger aims to convert Ethereum from a proof-of-work protocol to a proof-of-stake. The former uses crypto miners to add blocks to the blockchain, while the latter uses validators staking ETH to have a chance to extend the blockchain.

This proof-of-stake conversion will be accomplished by merging the Ethereum mainnet with the system’s Beacon chain. It is a proof-of-stake chain that has been running on the Ethereum network since December 2020. The launch of the Beacon chain was the first step in the merger.

Next up will be Ethereum’s Bellatrix upgrade on September 6th. The remaining stage of the process, called the Paris upgrade, is expected to start rolling out around September 15.

As long as nothing too disruptive happens during the upgrade process, many crypto insiders believe investors should expect to see positive returns from the merger.

Updating an entire blockchain protocol under heavy usage remains a very difficult task. An estimated 1.3 million transactions take place daily on the Ethereum network.

Ben McMillan, co-founder and chief investment officer of IDX Digital Assets, says options markets are very bullish on the merger. Although he also says he is nervous, there could be a “buy the rumour, sell the news” mentality, which could hurt the price of Ethereum in the short term after the merger.

If the merger goes smoothly, some investors may end up liquidating their positions after implementation. After the merger, these investors might believe that they have already capitalized on its value, and they might then sell their positions and cause prices to fall in the short term.

Anthony Scaramucci, founder and managing partner of global asset management firm Skybridge Capital, told CNBC earlier this month that many traders “will likely sell on the news of the merger,” but cautioned against this, saying Ethereum was a great long-term investment. .

Ethereum price trend

The merger should certainly produce short-term effects on the price of Ethereum. Traders may want to watch these developments closely. But the question for other investors will be where Ethereum will go in the long term.

Nobody can know exactly where the price of ETH will be by the end of the year. McMillan predicts that Ethereum will reach a price level “north of around INR 159,744” before the end of 2022.

Obviously, this is a bullish price prediction and a handful of factors could affect it.

In addition to the merger, many crypto insiders believe investors may want to look at macroeconomic factors such as inflation and government cryptocurrency regulations to help determine their investment strategies for the rest of this year. year.

Cryptocurrencies have not proven to be the inflation protection that some early adopters of Bitcoin claimed. Instead, many cryptocurrencies, and ETH in particular, have begun to move in tandem with high-risk stocks like tech-heavy BSE.

This means that macroeconomic factors such as inflation could continue to put pressure on the overall price of ETH. In an inflationary environment, many investors fall back on commodities like oil and gold and tend not to be as interested in riskier investment vehicles like tech stocks and cryptocurrencies.

Many eyes are also on the US government, Indian government, and other international regulators for upcoming legislation, as the regulations can significantly affect cryptocurrency prices.

Ethereum Volatility

Ethereum, like all cryptocurrencies, has proven to be an extremely volatile investment, and rapid price swings can be triggered by the smallest news.

Reaching a high of over INR 3,50,224 in November 2021, ETH is now down over 64% to around INR 1,35,200.

Although McMillan expects ETH to break the psychological barrier of INR 1,59,744 again before the end of this year, the volatility of the cryptocurrency can make such price predictions difficult to determine accurately.

McMillan advises investors to consider cryptocurrencies like Ethereum, similar to Nasdaq stocks in the late 1990s. cryptocurrency will be in five to 10 years.

Of course, with any high-risk investment like cryptocurrency, investors should remain aware of the risks and not invest more than they can afford to lose.

Ethereum and other cryptocurrencies are volatile, high-risk investments that can change direction quickly. Investors should always exercise due diligence and be prepared for the volatile nature of these investments.

Comment here