Why the largest altcoin by capitalization has fallen in price by 18% over the past week and how its price may change in the near future
On August 20, the Ethereum exchange rate updated the local minimum at $1.52 thousand. As of August 22, 16:40 Moscow time, altcoin is trading at $ 1.56 thousand, it has fallen by 4% in a day, and by 18% in a week. Experts explained to RBC-Crypto the reasons for the altcoin’s depreciation and told about its prospects.
On August 14, the Ethereum exchange rate at the moment exceeded $ 2 thousand, after which it began to decline. The growth of the cryptocurrency was associated with the successful final testing of the “Merger”, but this news has completely played itself out and no longer has any effect on the exchange rate, explained Roman Nekrasov, co-founder of the ENCRY Foundation.
According to the expert, taking into account the general turbulence in the crypto market, the rate for ETH at the level of $ 1.5 thousand is quite justified. Nekrasov expects that as we approach the update of The Merge, the volatility of the ether will increase.
“I believe that it can drop to $1.3 thousand, and then grow to $2 thousand in a week or 10 days from the “Merger”, because some investors will want to get free ETHPOW coins that will appear as a result of the hard fork,” the expert suggested. He predicted that about a week before the update — September 7-8, the Ethereum exchange rate will exceed $ 2 thousand.
One of the reasons for the recent decline in the Ethereum exchange rate to $1.5 thousand is a senior analyst Bestchange.ru Nikita Zuborev called the detection of bugs during testing of the ETH 2.0 update in the Goerli test network. The developers found a problem with the formation of blocks in two clients. The publication of these errors occurred just before the start of the fall, so this could be the “trigger”, the analyst believes.
He pointed out other negative aspects that could lead to a decline in the exchange rate.
In particular, the developers reported that in fact, the transition to PoS will not lead to a reduction in gas fees, which many investors expected. The statements of the largest mining pool Ethermine that they would stop mining immediately after the update and would not support any PoW fork of the ether could also have a negative impact.
The expert also pointed to the announcement of the Chicago Mercantile Exchange (CME), which plans to launch options on Ethereum futures on September 12. Zuborev explained that any derivatives simultaneously reduce long-term volatility, but increase pressure on the expiration dates of contracts. For example, the appearance of the first bitcoin futures on CME was one of the key factors in the start of the price collapse at the end of 2017.
Speaking about the prospects of Ethereum, the expert suggested that if the blockchain is successfully updated, the demand for altcoin should grow, network costs will fall, and the supply will decrease due to the features of the PoS consensus algorithm.
“A significant part of the funds will be physically frozen on smart contracts, so by the end of the year Ethereum can quite easily double or even triple the current price only due to technical factors,” Zuborev predicted.
He warned that while the Ethereum community remains under close influence, any negative news can cause short-term drops like what we saw last week. This factor should also be taken into account if the planning horizon is less than six months, the specialist concluded.
