Ethereum Price: Going Lower or New All-Time Highs Coming?

Elon Musk kickstarted the crypto sell-off by voicing his concerns about Bitcoin’s massive energy consumption when mining new coins.

In one tweet, Musk went onto say:

“Tesla has suspended vehicle purchases using Bitcoin. We are concerned about rapidly increasing use of fossil fuels for Bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel.”

The news caused many investors to second guess their investment, which caused panic selling, and an eventual sell-off ensued.

But, Ethereum may have a solution to quell Elon Musk’s concerns.

In early December of 2020, the Ethereum 2.0 upgrade began, which was designed to increase the network’s scalability and security. Most significant is that the network will shift from Bitcoin’s proof-of-work algorithm for verifying blocks and mining coins to the proof-of-stake algorithm.

The proof-of-work system has been criticized for using vast amounts of computing power — and massive energy consumption — to mine new coins.

In the Ethereum Foundation blog post, the network went onto say:

“Eth1 is primarily the operation and upgrading of Ethereum’s user-layer — state, transactions, accounts — all the things the end-user considers when interacting with Ethereum. Eth2, on the other hand, is a series of upgrades meant to overhaul Ethereum’s core consensus — to move from the energy-hungry, inefficient proof-of-work to a more sustainable, scalable proof-of-stake.”

Why proof-of-stake is better than proof-of-work

Within the proof-of-work system, miners use computer hardware processing power to solve complex mathematical puzzles to verify new transactions. The first miner to solve a puzzle adds a new transaction to the record of all transactions that make up the blockchain. The miner is then rewarded with crypto coins.

However, because this process can be energy-intensive, it has caused many to question the negative implications of such a mechanism on the environment — the main reason Elon Musk stopped accepting Bitcoin as a payment option for Tesla Motors.

But, this is where Ethereum 2.0 is stepping in to be a game-changer.

Ethereum’s proof-of-stake system differs in that instead of miners, transaction validators stake crypto for the right to verify a transaction. These validators are selected to propose a block based on how much crypto they hold and how long they’ve held it for.

Other validators can then attest that they have seen a block. When there are enough attestations, a block can be added to the blockchain. Validators then are rewarded for the successful block proposition — a process known as “minting” or “forging.”

The main advantage of proof-of-stake is that it’s far more energy-efficient than the proof-of-work mechanism, as it decouples energy-intensive computer processing from the consensus algorithm.

It also means that you don’t need a lot of computing power to secure the blockchain.

A glimpse into the Ethereum 2.0 upgrade timeline

Etherum 2.0’s rollout is outlined in an article posted on Decrypt, which goes onto show the following set of events:

Phase 0 sees the implementation of the Beacon Chain; this stores and manages the registry of validators and deploying the proof of stake (PoS) consensus mechanism for Ethereum 2.0. The original Ethereum PoW chain will run alongside this, so there is no break in data continuity.

Phase 1, due in 2021, will see the integration of proof of stake shard chains. The network is expected to launch with 64 shards (enabling 64 times more throughput than Ethereum 1.0), though, at launch, they won’t support accounts or intelligent contracts.

Phase 1.5, an interim update due in 2021, will see the Ethereum main net officially becoming a shard and transitioning to proof of stake.

Phase 2, slotted to launch in 2021/22, will see shards becoming fully functional and compatible with smart contracts. It also involves adding Ether accounts and enabling transfers and withdrawals, implementing cross-shard transfers and contract calls. It will build execution environments for scalable apps that are built on top of Ethereum 2.0.

Most of the “gloom and doom” articles and videos about the crypto market are primarily produced because it’s a trending topic. Anything negative about Bitcoin or crypto crashing will get views.

For example, the other day, I read a few articles about how this is the end of Bitcoin and Ethereum. It intrigued me because I’m always open to new perspectives. But, after a few minutes of reading, I noticed that all of the articles were just rehashing the same generic points to plead their case, and none of them were convincing.

Now, these types of articles won’t make an experienced investor second guess their position. But, they can be damaging to those who aren’t as experienced — leading to panic selling via an overreaction to a normal retrace.

I reference a normal retrace because this isn’t the first time the crypto market has seen such adverse price action.

Bitcoin, trading near $18,000 at the beginning of 2018, saw its value drop near $3,000 by the end of the same year. This was followed by a bull run reaching values near $12,000 by July of 2019, only to fall back down to $5,000 in March of the same year.

We all know what happened next — a bull run that saw Bitcoin rise in value to eventually trade above $60,000 earlier this month.

While Bitcoin’s little brother, Ethereum, saw similar price action. At the beginning of 2018, Ethereum was trading above $1,400, only to fall to $400 by March of the same year. We saw prices swing back up as high as $800 by May and drop as low as $90 at the tail end of 2018.

Just the same, a bull run ensued that saw the value of Ethereum rise above $4,000 earlier this month.

One of the most significant indicators showing this is a healthy retrace — a high probability that a new uptrend will form — comes when we look at the accumulation/distribution (A/D) indicator.

Investopedia defines the A/D indicator as:

The accumulation/distribution indicator (A/D) is a cumulative indicator that uses volume and price to assess whether a stock is being accumulated or distributed. The A/D measure seeks to identify divergences between the stock price and volume flow. This provides insight into how strong a trend is.

If the price is rising, but the indicator is falling, it suggests that buying or accumulation volume may not be enough to support the price rise, and a price decline could be forthcoming.

From the chart, we can clearly see that the drastic pullback has had no effect on the A/D, which is a bullish indication that investors are accumulating Ethereum as the price declines.

This is typically followed by a formation of a new uptrend in a majority of similar trading setups.

The ongoing “gloom and doom” talk surrounding crypto isn’t enough to sway many regarding Ethereum’s future price, which is expected to continue rising in the long term.

Speaking to CNBC, billionaire investor Mark Cuban said that after the upgrade, applications on Ethereum will see it “dwarf” Bitcoin, and went onto say that he now holds “a lot more” Ethereum than Bitcoin.

Similarly, Raoul Paul, co-founder and CEO of Real Vision Group, shares the same bullish sentiment that Ethereum will continue rising in value.

In a series of tweets, he said:

To add more credence, Digitalcoin predicts Ethereum will more than double in value by 2023. Their forecasts go on to predict future prices in:

• 2021: $3,542
• 2023: $5,178
• 2025: $7,658
• 2028: $11,107

While algorithm-based forecasting service WalletInvestor puts the one-year forecast at $3,703 and the five-year forecast at $9,983. Reinforcing the bullish sentiment that is shared among many analysts and those who are more in tune with the crypto market and Ethereum.

From this, we can see that the sentiment around Ethereum is still bullish, that the value will continue to rise, and what we are experiencing is just a short-term retrace and nothing more.

Source: https://medium.datadriveninvestor.com/ethereum-price-going-lower-or-new-all-time-highs-coming-a55f15cea6e6?source=rss——-8—————–cryptocurrency