Analyzing Ethereum’s Potential Amid Fears of Bitcoin Crash in 2018
Ethereum is an offshoot of Bitcoin, so it’s understandable why investors view the two through the same lens. I often see them worrying that Ethereum prices will nosedive in the event of a Bitcoin crash in 2018. With Bitcoin prices near their all-time highs, fears of a Bitcoin crash may be well-founded. But holders of ETH have little to worry about.
Altcoin prices have historically moved in tandem with Bitcoin. Every time Bitcoin generated investor interest, altcoins—one of which is Ethereum—likewise gained traction. And whenever Bitcoin prices hit a rough patch, altcoin prices correspondingly reacted.
Altcoins, by definition, are alternatives to Bitcoin. In other words, Bitcoin’s substitutes. So, ceteris paribus, if demand for one goes up, demand for the other should technically head in the opposite direction. However, that has not been the case.
This is because, outside the circles of the crypto-community, altcoins and Bitcoin are often viewed as complements of each other. For the average Joes, they are all cryptocurrencies with the same underlying technology—blockchain.
Since Bitcoin is the bellwether cryptocurrency of the digital world—the biggest, mightiest, and most popular of all—it’s obvious that a crash in its prices would have a ripple effect across the industry.
That said, I’ve analyzed the probability of a Bitcoin crash in 2018 and have concluded that the chances of that seem trivial. But if, let’s say, a major wave of fear, uncertainty, and doubt (FUD) triggers a mass sell-off, it’s obvious that ETH prices may follow in the short run.
Here’s how Ethereum’s price performance stacks up against Bitcoin’s for the past one quarter.
Chart courtesy of TradingView.com
Behavioral analysis has shown us that cryptocurrency investors largely move in herds. We saw a trailer of it back in September when China banned initial coin offerings (ICOs). An industry-wide price slump ensued, largely triggered by FUD.
So the question shouldn’t be whether ETH prices will be affected in the event of a Bitcoin crash. The answer to that should be obvious by now. The right question to ask is whether ETH prices will recover post such an event.
Will Ethereum Rise After Bitcoin Crash?
I can say with much conviction that Ethereum prices can weather an industry slump in the long run. There’s a reason why I say it.
Just compare Ethereum and Bitcoin. Although derived from the same blockchain technology, they are anything but the same. Bitcoin is a digital currency platform vying to replace fiat currency. Ethereum is a network for running decentralized apps (Dapps). The two are built for entirely different purposes.
So while Bitcoin may or may not succeed in its mega game plan, Ethereum is already winning this one.
More than 930 Dapps are presently running on Ethereum’s network, and more are being added with time. Likewise, major tech corporations like Microsoft Corporation (NASDAQ: MSFT), Cisco Systems, Inc. (NASDAQ: CSCO), and Intel Corporation (NASDAQ: INTC) have also joined the Enterprise Ethereum Alliance (EEA)—an initiative to promote Ethereum to global enterprises.
Major global banks including JPMorgan Chase & Co. (NYSE:JPM), Credit Suisse, Barclays PLC (LON:BARC), UBS Group AG (NYSE:UBS), Mitsubishi UFJ Financial Group Inc (TYO:8306), National Bank of Canada (TSE:NA), Bank of Nova Scotia (NYSE:BNS), Banco Santander, S.A. (NYSE:SAN), and BBVA Banco Frances S.A. (NYSE:BFR) are also taking interest in Ethereum’s decentralized “smart contracts” feature.
Long story short, Ethereum is growing by leaps and bounds.
As such, once their technical difference becomes discernible to the average investor, we may begin to see a decoupling in ETH and BTC prices.
Ethereum Price Forecast 2018: Why Is Ethereum Skyrocketing?
As Ethereum generates interest in the corporate ad financial world, more and more transactions are being conducted on its platform.
In the past two months alone, during which Ethereum prices made new highs, transactions on its platform more than doubled. The surge in demand for its crypto-coin, “ether,” has been unprecedented. As a result, ETH prices have skyrocketed.
I just compared Ethereum’s transactions history with that of Bitcoin’s and I’ve been left dazed. While Bitcoin’s market worth is nearly double that of Ethereum’s, transactions on its platform have been less than half of that of Ethereum. (Source: “Bitcoin, Ethereum Transactions historical chart,” BitInfoCharts.com, last accessed January 7, 2018.)
Just look at the past 24 hours. Ethereum has processed over 1.14 million transactions, compared to Bitcoin’s only 367,000.
Obviously, one reason for Bitcoin’s fewer transactions is its slower platform. While Bitcoin’s network can take a load of barely four transactions per second, Ethereum processes 15 transactions in the same time.
However, that too is very low compared to new industry standards. One of their peers, Ripple—which recently took Ethereum’s place as the second most valuable cryptocurrency—can process up to 1,500 transactions per second.
But wait, before you jump to any conclusions, let me inform you that something better is in the pipeline for Ethereum.
Ethereum founder Vitalik Buterin has recently revealed the roadmap for Ethereum’s next iteration, “Ethereum 2.0.” This will include upgrades that would increase Ethereum’s capacity to process thousands of transactions per second.
Plus, another reason why Ethereum prices have been shooting for the moon is the recently launched upgrade dubbed “Casper,” which shifts Ethereum from a “proof-of-work” network to a “proof-of-stake” network.
Quite simply, this means that Ethereum miners will no longer have to spend on expensive equipment to earn rewards, as Bitcoin miners do. Instead, Ethereum will reward miners based on their stakes in the network.
The shift will incentivize more miners—and ultimately more users—to join Ethereum’s platform.
Analyst Take
Comparing Ethereum with Bitcoin is a chalk-and-cheese comparison. While it’s true that an industry slump caused by crypto-frontrunner Bitcoin may hurt ETH prices in the short run, a BTC crash should have little, if any, effect on Ethereum prices in the long run.
Ethereum is cozying up with some of the biggest businesses in the world. We’re foreseeing solid growth potential in ETH prices as this year may turn out to be one of its highest performance years.
So, my ethereum price forecast for 2018 is nothing but bullish as we watch ETH prices breach the $1,000 barrier and head straight for our price target of $1,500.