The price of ether (ETH), The native cryptocurrency of Ethereum, declined more than Bitcoin (BTC) in the latest market crash.
After hitting an all-time high on Coinbase, The price of Bitcoin fell sharply by more than 9% within a few hours. In the same period Ether corrected more than 11% after a market-wide retreat.
The profound correction in Ether is a surprise due to the start of the Eth2 network update. On December 1st, Eth2’s Beacon Chain went online on the mainnet, marking an important milestone for Ethereum.
What led to the strong correction in ether?
Eth2 is a major network upgrade for the Ethereum blockchain that improves scalability and transaction ability. Before the upgrade, the network was processing about 15 transactions per second.
After the update Ethereum can scale to thousands of transactions per second. possibly more with long-term shards.
This is a fundamentally optimistic update for the Ethereum network because it enables decentralized applications (DApps) to function without scalability barriers. This would also lead to new DeFi (decentralized finance) cycles becoming more sustainable and making the user experience easier.
An ether correction after upgrading to Eth2 could have been expected due to the market tendency to buy rumors and sell news. For example, when the Eth2 update was confirmed in late November, the price of Ether also fell from $ 620.
Even so, The 11% drop in the price of Ether in just two hours surprised many traders. The importance of the Eth2 update and its associated impact are likely to have led the market to expect more resistance from Ether in the short term.
Industry executives were also very optimistic about Ethereum’s medium- and long-term growth trajectory following the launch of the Beacon Chain. This is likely to have contributed to the overall positive market sentiment around ETH.
Joseph Lubin, Co-creator of Ethereum and founder of ConsenSys, Eth2 and Proof-of-Stake (PoS) described as monumental improvements. Said::
“The introduction of the # Eth2 Beacon Chain is characteristic of the emerging open source spirit that primarily draws so many people to Ethereum. Over 27,000 validators from around the world are now participating in the new # Eth2 consensus model. Proof of Stake is a monumental improvement on the crypto-economic incentives that are already making Ethereum an objective and automated foundation for trust. Together, we’re deepening our commitment to building a fully decentralized network. “
What’s next for ether?
Traders expect a deeper retreat or at least some consolidation in the short term. The futures market took a big hit when BTC fell sharply and devastated the derivatives market.
A dealer known as “TraderKoz” He said Ether would become attractive once it consolidates back above USD 620. The $ 561 level remains a major short-term support level for ETH if the pullback continues. The dealer said::
“We are building a good PA around the range on Monday and a good weekly open day. I wouldn’t be surprised if we consolidated in the middle range here for a while. I will be interested in more long positions once we trade above $ 620. “