Since March’s lows of $90, Ethereum has bounced back with strength. So much strength, in fact, that the cryptocurrency traded at $200 — over 120% higher than the lows — just six weeks after the drop to double digits.
It’s a stark reversal that has left many analysts wondering what exactly transpired, both in terms of fundamentals and technicals, to have pushed Ether so much higher and in such a short period of time.
Here are some of the reasons why such a strong move has transpired.
Ethereum price chart from March lows from TradingView.com
What’s Behind Ethereum’s Explosive Move
It seems that much of Ethereum’s rally has largely been predicated on investors buying into a number of positive narratives for the cryptocurrency.
Firstly, the past few weeks have seen heavy development and progress on the Ethereum 2.0 upgrade, which will dramatically increase the scalability and usability of the blockchain. Last week, in particular, saw the release of the “Topaz” testnet for Ethereum 2.0’s Phase 0 spec. Etherscan data suggests that the testnet has already seen strong adoption with around 20,000 active validator nodes.
Analysts expect the launch of Ethereum 2.0, which is on track for late-Q2 or Q3 of this year, to have an astounding effect on the price of its cryptocurrency.
Secondly, data shows that the daily value of coins transferred on Ethereum recently matched that of Bitcoin, despite the former blockchain having less than 20% of the market capitalization of the latter. It’s a strong sign that many have said bodes well for the future of Ether.
It Isn’t Over Yet
Although Ethereum has already embarked on this impressive 120% rally, analysts think it isn’t over yet.
Some of Ether’s recent rally has been predicated on the hype surrounding the impending upgrade of the blockchain, but analysts predict that once the upgrade is implemented, the cryptocurrency could perform even better.
As reported by NewsBTC previously, partner at Metacartel Ventures, Adam Cochran, explained that the introduction of Ethereum 2.0 is likely to cause the “largest economic shift in society” due to seven main reasons, which can be simplified to three:
- Ethereum validators to cause a supply shock: With the introduction of staking through 2.0, investors will rush to buy 32 Ether to earn a return on their holdings. Cochran explained this is likely to cause a supply shock.
- Retail investors will flood into the market: Due to this ETH demand, retail investors, which are what primarily drove up the crypto market in 2017, are likely to start investing as well, creating an even greater supply shock.
- Fundamental demand for Ether will increase: Due to the fundamental improvements that Ethereum 2.0 will roll out, Cochran expects the market to start to scoop up lots of Ether for fundamental reasons, like to work with contracts, to use in decentralized finance, etc.
Get Prepared, Whatever Way Ethereum Moves
With this convergence of fundamental factors, it is important that investors are prepared for Ether’s price action, whatever way the asset moves.
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Register for PrimeBit today to see how you can benefit from moves in the price of Ethereum and other cryptocurrencies.
Photo by Johannes Plenio on Unsplash
