Why the biggest altcoin by capitalization has fallen 18% over the past week and how its price may change in the near future
On August 20, the rate of Ethereum updated the local minimum at $1.52 thousand. As of August 22, altcoin is trading at $1.56 thousand, it fell in price by 4% per day and by 18% per week. I will explain the reasons of altcoin rate decrease and tell about its perspectives.
On August 14, the rate of Ethereum at a moment exceeded $2,000, after which it began to decline. The growth of the cryptocurrency was due to the successful final testing of the “Merger”, but the news fully paid off and has no impact on the rate anymore.
Given the general turbulence on the crypto market, the rate for ETH at $1,500 is quite justified. I expect the volatility of ether to increase as we get closer to The Merge updаte.
“I believe it may drop to $1.3k and then grow to $2k in a week to 10 days from The Merge because some investors will want free ETHPOW coins that will appear as a result of the hardforge,” the expert suggested. He predicted that approximately a week before the updаte – September 7-8, the rate of Ethereum will exceed $2 thousand.
One of the reasons for the latest decline of Ethereum rate to $1.5k is the discovery of bugs while testing the updаte ETH 2.0 in the Goerli test network. The developers discovered a problem with block forming in two clients. The publication of these bugs happened just before the crash started, so this could be the “trigger.”
There are other negative aspects that could have led to the decline. In particular, the developers said that the move to PoS would not actually lead to a reduction in gas fees, which many investors had expected. Also, statements from Ethermine, the largest mining pool, that they would stop mining immediately after the updаte, and would not support any PoW fork of ether, may have had a negative impact.
The announcement by the Chicago Mercantile Exchange (CME), which plans to launch options on Ethereum futures and any derivatives on September 12 simultaneously reduces long-term volatility, but increases pressure on contract expiration dates. For example, the emergence of the first bitcoin futures on the CME was one of the key factors starting the price collapse in late 2017.
Speaking of Ethereum’s prospects, my guess is that if the blockchain updаte is successful, demand for the altcoin should rise, network costs will fall, and supply will shrink because of the features of the PoS consensus algorithm.
“A significant amount of funds will be physically frozen in smart contracts, so Ethereum could quite easily double or even triple its current price by the end of the year just due to technical factors.”
He warned that while the Ethereum community remains under scrutiny, any negative news can cause short-term drops like the one we saw last week. This factor is also worth considering if the planning horizon is less than six months.
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