Why is Ethereum going under again?

columnFrom Dogecoin to Ethereum - speculative madness on the crypto market

It's just a side note. But anyone who is in an exchange with finance-savvy people these days will quickly come to the topic of crypto currencies. That's what happened to me last week in a round with people, each of whom has already founded several companies in his life. Economically successful investors who reported about investments in Dogecoin. In disbelief, one then asks about the meaningfulness of this so-called investment and then one hears as a reason that on the one hand the course only knows the upward direction and on the other hand Elon Musk is a guest on the Saturday Night Live show in the USA on the second weekend in May. And possibly could say something about cryptos, about Dogecoin.

Now you don't have to value cryptocurrencies as hard as Charlie Munger, partner of Warren Buffett, who thinks cryptos are "disgusting" because the currencies are useful to kidnappers and blackmailers. However, some of the ratios drop in the case of cryptos. Because Dogecoin is primarily about catching someone who pays a higher price than you paid yourself. This has worked extremely well so far, the journey just can't go backwards. Then the market value of $ 60 billion should quickly turn into a fraction.
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But there are also exciting developments outside of Dogecoin and they are more serious to look at. Bitcoin has been leading the way in cryptocurrencies for years. But the nimbus of the top dog is shaking, Ethereum is becoming increasingly important and is becoming the focus of professional investors. There are good reasons that speak for a new balance of power in the crypto market.

Because at the beginning of May the time had come: Ethereum climbed over the round 3000 threshold and rose to a record high of more than 3300 dollars. While the bottom line has been that Bitcoin has only been moving sideways for weeks and has grown by around 500 percent in the past twelve months, Ethereum is showing a much higher dynamic. In the same period, the second largest cryptocurrency climbed by more than 1500 percent, and in the past 30 days alone it has increased by 60 percent. Investor demand is high, which Vontobel is also noticing in the certificates market. With the WKN VQ552V, the Swiss have issued a new participation certificate on Ethereum. Bitcoin has also been refined, the appropriate WKN is VQ63TC.

Ethereum is still undervalued compared to Bitcoin

Calculated in euros and dollars, the increases are already impressive - also compared to Bitcoin. The Ethereum / Bitcoin ratio provides information on this. In early 2020, investors received less than 0.02 bitcoin for Ethereum. The ratio has risen from 0.03 to 0.06 since mid-March. With a market value of around $ 380 billion, Ethereum has a dominance of around 15 percent in the entire crypto universe. In contrast, the share of Bitcoin relative to other coins recently slipped from 60 to less than 50 percent.

In the long term, Ethereum is still undervalued compared to the crypto-primus. In the summer of 2017, Ethereum temporarily cost 0.15 Bitcoin. Applied to the current situation, the second largest coin would have to be around $ 8,400. Unsurprisingly, there is also increasing demand from the institutional side: In Canada, two listed Ethereum funds (ETFs) are already on the market.

Ethereum is particularly suitable for DeFi or NFT transactions, as transactions can be linked to certain conditions (“smart contracts”). It is estimated that there is already more than $ 65 billion in DeFin projects running on the Ethereum blockchain. At the Etoro broker, active investors can even trade (crypto) currencies against each other. There are currently 101 different pairs, from Bitcoin vs. Ethereum to EOS against the US dollar.

From a technical point of view, the next milestone is imminent with a major Ethereum update in mid-July. After the so-called London Hard Fork, the previously inflationary Ether development changes into a deflationary one, because the fees for transactions are burned. The falling ether supply could lead to further price increases, especially since Ethereum is becoming more and more established as a smart contract platform and thus the foundation of the entire crypto economy. Bitcoin appears as a pure means of payment, just like it did in the past. Ethereum now has more than a third of the market value of Bitcoin. There is already speculation that the number two by market capitalization could take the lead. Such a flipping still seems unthinkable. But especially in the crypto market, the dynamic should not be underestimated.

 


Daniel Saurenzruns the stock exchange portal Feingold Research with his team. It offers a daily market letter that you can test free of charge for 14 days. Sign in at [email protected] or try the stock exchange service under this one link out. You can find training days and coaching at NEW under feingold-academy.com