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Ethereum Price Preview October 12 – 18


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.

Last week saw a resurgence in the DeFi markets along with interesting relationships developing between Ethereum and Bitcoin. In this piece, we take a look at the various factors that may be impacting Ethereum price for the week ahead.

Sell Side Liquidity Crisis for BTC, or DeFi’s Growing Appetite?

As Bitcoiners continue to hold out for a price spike, a stalemate has emerged in the BTC market. The lack of weak hands in the market is arguably leading to a sell-side liquidity crisis, according to some analysts, wherein Bitcoin has nowhere to move. This narrative may appeal to those hoping to see Bitcoin become an increasingly rare commodity, as one outcome of this behavior is an upside breakout.

However, it’s likely that many analysts have failed to account for the relationship between Bitcoin and DeFi at the moment. $1.5 billion in Bitcoin has now moved to Ethereum as part of an increasing preference to earn yield on idle BTC holdings. With such a large sum tied up in DeFi, it’s likely that a good chunk of the perceived liquidity drought on the sell side is actually BTC simply tokenized but still in use on the Ethereum network.

The DeFi market rebound was likely a result of two factors. First, bullish trends in Bitcoin drove other markets higher with BTC market dominance currently at around 57%. While online searches for Bitcoin have dropped off, last week saw headlines such as Square buying $50 million worth of Bitcoin, stating that the company fully supported the project.

Second, as predicted in last week’s article, many DeFi tokens were oversold, with token price drops seemingly at odds with higher project revenues. Yearn finance rose over 36% last week, and is now up approximately 29% from last week’s low, with Cointelegraph analysts speculating that further upside price action may be en route.

Uniswap continued to grow last week, with the TVL now standing at a record $2.64 billion. The TVL of the entire DeFi ecosystem is currently hovering at $10.9 billion.

Source: DeFi Pulse

$400 ETH May Be on the Cards, but Network Congestion Grows

FX Street analysts forecast a return to $400 for Ethereum, having broken through resistance at $360 and $370 already. ETH is hitting strong resistance at $380, now trading in the mid $370 range, but the RSI indicates that the cryptocurrency may be consolidating for a breakout.

On the downside, ETH is showing very strong support between $340 and $350, with 13.2 million ETH purchased by around 850 million addresses in that range recently.

While the short-term trading activity may be bullish, the fundamental health of the network still depends on ETH 2 progress being made. ETH 2 developer Danny Ryan unveiled a bug bounty program for ETH 2 last Friday, announcing a shift in focus from attacknet and spec programs to the new bug bounty initiative.

Bug bounties can often be lucrative and productive for dev teams and bug hunters alike, with one bug hunter in 2018 making $120,000 in a single week finding bugs in the EOS blockchain. The program is a welcome one, as network congestion continues to impact user experience on Ethereum. 

CoinDesk recently pointed out that some users were paying as much as $30 to run simple smart contracts or vote on governance issues, highlighting the need for scaling solutions as soon as possible. It’s likely that the recent congestion came to a head and led to a drop in user activity yesterday, with fewer active users on the network and reduced gas prices.

Ethereum co-founder, Vitalik Buteirn, spoke out today in favor of rollups, the scaling solution we discussed last week, stating that the recent dip in gas prices should be the norm once the solution is in place.

Gas prices fell 22% yesterday, while remaining up 241% from this time last year.

Source: Ycharts

For now, the network is playing a game of cat and mouse between user activity and usability, with too much activity making the network difficult to use, resulting in less activity.

This is not a long-term sustainable situation, but with the continued growth in layer 2 solutions and today’s success of Zinken’s “dress rehearsal” for ETH 2, the community appears satisfied that real scaling solutions are on their way.

Media Roundup

The Ethereum Engineering Group is hosting the Account Abstraction meetup on Wednesday October 14. Account abstraction refers to the consolidation of both main types of Ethereum account into just one, a smart contract account. The online event will feature Ethereum’s Vitalik Buterin who will give a history of the concept of Account Abstraction, the various approaches, along with his thoughts on the best approach.

On Thursday October 15, the Taipei Ethereum Meetup is hosting an event called Ethereum Improvement Proposal 1559, Gas Golfing, and More! The event will center around discussion on how to reduce gas costs in Solidity for Ethereum developers.

Finally, on Friday October 16, Complexity Weekend is hosting the Applied Complexity Hackathon. The page states that “Complexity Science is an interdisciplinary and inclusive framework for studying, designing, and controlling Complex system behavior, such as global pandemics, extreme weather events, electoral politics, economic recovery and poverty, and much more.”

Broadly speaking, the event aims to teach analysts how to use technology to predict and plan around catastrophic events and build towards a fairer geopolitical climate.

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Conor Maloney
Conor Maloney Analyst