Welcome to the Ethereum Price Preview, an analysis of current and upcoming market events and how they might shape the price of ETH and the trajectory of the network.
With parabolic growth continuing in the Ethereum ecosystem, we take a look at the risks and fundamentals that may be impacting Ethereum price for the week ahead.
ETH Price Meets Resistance at $450
Ethereum smashed through resistance earlier this week to hit a two-year high of $445.20. The solid gains came despite Ethereum hitting a two-month low in daily active addresses.
Ethereum’s parabolic uptrend shows little sign of stopping, although some market analysts believe the psychological line of resistance found at $450 may prove tougher to break than previous milestones.
On August 13, ETH fees reached an all-time high of $8.07 million, over six times the amount spent on the Bitcoin network.
Last week also saw more Bitcoin minted on Ethereum than there was mined on the Bitcoin blockchain. This has been driven largely by high yielding DeFi applications that interface with “wrapped Bitcoin”. These signals have led to fresh conversations springing up around a potential “flippening” in which the Ethereum market cap overtakes that of Bitcoin.
This is a very bullish signal in the eyes of many analysts. While the DeFi craze can seem intimidating and unsustainable, the simple fact is that fees are high because people are willing to pay them. With the intrinsic value of Ethereum supported by fundamentals markers like high fees, there’s good reason to anticipate further bullish momentum.
On the other hand, high fees can negatively impact key components of the ecosystem such as oracles and other moving parts reliant on smart contracts. High fees also squeeze out users who are unwilling or unable to pay the increasing largely cost of transacting on Ethereum.
ETH 2 Progress Report
The Medalla testnet, which launched earlier this month, ran into difficulties last week that stemmed from Cloudflare’s anti-DDOS software. ETH 2 client teams reported that the issues were solved just hours later, but the crash, which lasted for 90 minutes, saw the number of Medalla validators and the value of their holdings drop significantly via “slashing”.
It’s possible that the bug will shake confidence in the health of the ETH 2 rollout in general, perhaps causing major investors to act more cautiously until further progress is announced.
DeFi Risk Mounts
Ethereum has seen stunning progress in recent months with record-breaking network activity, exponential growth in DeFi TVL and project milestones being reached throughout the space.
The total value leveraged in DeFi now stands at an incredible $6.34 billion just 10 weeks after first breaking the one billion dollar mark with the market cap of all major DeFi tokens surpassing $15 billion.
The DeFi boom now appears to be unstoppable, with many investors raising concerns that the yield farming craze is unsustainable and may well end in catastrophe. Hints of this have already been observed with the partial failure of Ethereum options platform, Opyn, and the dramatic events that unfolded with the self-described “unaudited experiment” that was YAM last week.
As hysteria continues to mount, the need for investors to do even the basic due diligence is more pressing than ever. Few are doing so.
Ethereum Sao Paolo is hosting an online event on Monday August 17 called “Complete decentralization of DApps – Is it Possible?”. The event features Ricardo Guilherme Schmidt of Status.im. Schmidt creates smart contracts for Status and also worked as an Ethereum developer for four years.
Discussion at the event will focus on decentralized applications not just using Ethereum, but also ENS, IPFS / Swarm and Whisper / Waku technologies, and Embark and React.js framework.