Last week, we discussed ongoing adoption in the Ethereum network. This week, we’ll take a look at the challenges that lie ahead for Ethereum amid negative sentiment around China’s trading and mining crackdown.
Chinese Crackdown Continues
China recently moved to ban crypto mining, with reports emerging last week that Chinese miners are offloading their GPU mining equipment en masse on second-hand commerce sites like Xianyu.
While the ban was supposed to target Bitcoin only, the government has gone a step further and directed power companies to cut power to other mining operations as well. Ethereum’s hash rate has fallen 20% since the crackdown, while Bitcoin’s is down 50%. Former miners are selling their equipment in bulk orders that are already driving down the price of once-scarce GPUs.
Some smaller mining operations in Sichuan appear to still be operational due to having their own self-sufficient power sources, but the crackdown is certainly out in full force and it seems likely that all mining throughout the country will soon be halted.
On July 08, there were reports that the government was also banning access to major crypto exchanges, causing major concerns of a wider crypto trading ban.
The Binance app and website was only accessible by VPN, likely as part of China’s effort to curb Bitcoin trading, although service appears to have resumed for now.
The crackdown is largely motivated by China’s digital yuan scheme, a state crypto initiative aimed at strengthening China’s foothold in international commerce and weakening the U.S. dollar. The e-currency would significantly increase the ability for the Chinese government to monitor the financial activities of its population.
Goldman Sachs Predicts an Ethereum Takeover
Investment banking giant Goldman Sachs remains bullish on Ethereum, although issued cautions regarding ETH volatility last week.
In a note to investors, Goldman Sachs stated that Ethereum looks set to overtake Bitcoin as the dominant store in value in crypto in the coming years.
Ethereum “currently looks like the cryptocurrency with the highest real use potential as ethereum, the platform on which it is the native digital currency, is the most popular development platform for smart contract applications,” says Goldman Sachs.
The bank clarified that the competition among cryptocurrencies is one of the factors preventing the creation of true safe haven assets in crypto, alongside high volatility. It also stated that crypto does not appear to pose a threat to gold directly at the moment. “We view gold as a defensive inflation hedge and crypto as a risk-on inflation hedge,” said the note.
Meanwhile, the Sygmun bank became the first bank in the world last week to offer ETH 2.0 staking services for its clients. 6.1 million ETH worth over $14 billion are now being staked, with over 185,000 validators.
ETH Price Movement
Ethereum has kept its head above $2,000, last trading at $2,135. The Chinese crackdown is creating considerable negative sentiment and potential selling pressure in the market, with risk currently skewed to the downside.
ETH’s 12-hour chart shows that price is below all the major simple moving averages (SMAs) while the relative strength index (RSI) also points downward, both of which are bearish indicators. A drop below $2,000 could trigger a selloff towards support $1,720 formed in late June. If trending higher, the main barrier to break through lies at $2,500.
The World Forum of Ethereum Scaling & Upgrading 2021 takes place today on July 12 in Shanghai, focusing on Layer 2 scaling solutions for Ethereum.
The Ethereum Community Conference takes place next week on July 20, promising “three intense days of conferences, networking and learning” at the largest European Ethereum event of the year. Speakers include Aave CEO Stani Kulechov, Solidity team lead and Ethereum Foundation representative Dr. Christian Reitwiessner, NonFungible.com co-founder Gauthier Zuppinger, and dozens more.