Can cryptocurrencies finally find their bottom? There are some positive signs for me, at least in the case of Bitcoin and Ether. Bitcoin seems to stay steady between 6000 and 7000 USD some time now. It found support by 6000 if sometimes it fell below this level that happened only very shortly.
Ether fell to approximately 167 USD in September, but ultimately the 200 dollar line seems to be some sort of support. On the top, the value of one ether was more than 0.11 Bitcoin, now it is only 0.031 (about a quarter of the top value). Ether is moving near 10 months lows now in Bitcoins and near 15 months low in USD terms.
I tried to find arguments why Ether can grow again – I hope it’s more than the usual wishful thinking of fans.
1. No more short selling?
“Institutional interest in Shorting Ethereum Dries Up” – wrote this week Crypto New Media. Genesis Global Trading crypto broker said after months of increased Ether lending and shorting hedge funds, “smart money” began covering positions and short interest decreased.
2. Huge 88% fall
Ethereum (and other second-line cryptocurrencies) fell much more from the top than Bitcoin. Bitcoin fell approximately 70 percent (5800/19,500), Ether 88 percent (167/1400). I suppose if some new upward trend began, the oversold Ether will overperform Bitcoin again.
3. Software update coming
The Ethereum developers are working on an important software improvement named Constantinople. That will cause the miner’s reward to decrease from 3 Ether per block to 2 per block. Maybe it is priced in already, maybe not. The update (hard fork) was coming this year but was postponed to next year.
In a similar case by Bitcoin in Summer of 2016, we saw an uptrend, although not very strong. (As Bitcoin reward per block halved. Next Bitcoin halving in the spring of 2020.) But in the long term, this is surely something that helps maintain the price because supply, miner’s selling will be decreasing.
4. Hash rate
The Ethereum hash rate was increasing quickly until March-April, then surging slowly until August. Since then, the hash rate is falling or stagnating, supposedly some miners stopped their production. That means that costs of mining, in great part, electricity, are lower now, and so the miners have to sell less ether to cover their expenses.
5. Speed, Proof of Stake
Other software updates in Constantinople will improve the scalability and the speed of the system, allegedly. On the long run, we are nearing to the “Proof of Stake” (PoS) system, that can revolutionize the system. (Steem is also using a variation of PoS.)
(See here by @bitcoinflood.)
6. Ether ETF?
Cboe, the exchange group behind the first market for bitcoin futures, is telling market makers that it is getting close to launching ether futures. The exchange is waiting on additional clarity from the CFTC (…) would mark a significant step in ether's maturation as it could open the door to wider trading in the crypto and possibly an ETF
– wrote Business Insider on the 1st of September.
I think if Bitcoin can finally have its long-desired ETF, Ether can have also one or better more of them. That can have a very positive impact on price – if overall cryptocurrency sentiment isn’t bad.
Dangers
The list of cons and risks can be also long. The greater risk seems to me if competitors of Ethereum, like EOS, but maybe also Steem and many more, are improving quicker than Ethereum. Especially by the smart contracts which were a great improvement in Ethereum system. (Many cryptos aim to offer smart contracts.)
Other danger could be if hardfork ends with errors, vulnerabilities were discovered. Other, a bad general sentiment of crypto-markets.
Conclusion?
Hofstadter's Law: It always takes longer than you expect, even when you take into account
Wikipedia
And:
Amara's law: We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run.
Wikipedia
As the postponed Ethereum hard fork also shows, young crypto enthusiasts have to be more patient, important progress in the crypto world is slower than thought before. (By the way, I forecasted this slower advancement here.) But this doesn’t mean progress will halt and improvements will be stopped. Cryptos have a future – but it begins seemingly a little bit later.
After many weeks of thinking, I decided to change some Bitcoins to Ethers now, by 0.0314 BTC/ETH. (About Steem and my attempts to buy Steem I wrote here.)
Disclaimer:
I am not a financial advisor and this content in this article is not a financial or investment advice. It is for informative purposes only, or simply to make you think, entertain, increase testosterone and adrenaline level. Consult your advisers before making any decision.
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(Cover photo: Pixabay.com)