In the past two weeks, the price of Ethereum (ETH) rose from $222 to $390, an increase of 75%. Many investors believe that the trend of Ethereum is boosting the entire market and may even push Bitcoin (BTC) up.
Three factors seem to have triggered a strong rise in Ethereum: DeFi, Ethereum 2.0, and the current long-term rise in the altcoin market.
The growth of DeFi is pushing altcoins up, but there are signs of bearishness
Since mid-June, the total value locked in the Decentralized Finance (DeFi) agreement has continued to soar. The introduction of protocol tokens, such as Compound’s COMP, has led to a growing demand for DeFi.
In the end, users discovered a phenomenon called “yield farming”, that is, users seek higher returns in the DeFi market and switch from one protocol to another to obtain incentives.
The DeFi market has exploded in a short period of time, causing many tokens connected with DeFi to skyrocket. In July, investors seemed to dump DeFi tokens and other smaller altcoins in favor of buying Ethereum and Bitcoin.
Today, the price of Ethereum reached its highest point in 2 years, soaring to $395 on BitMEX, but traders warned that the price may pull back. In fact, Edward Morra, a cryptocurrency trader, said:
“Yes, the rise is unsustainable and will adjust. If you are a newbie in this field, you can buy in the fall. Don’t buy at the top for fear of missing out.”
Ethereum 2.0 drives the upward trend of Ethereum
A continuing positive factor supporting the rise of Ethereum is the expectation of Ethereum 2.0. In August, Ethereum developers are expected to launch Medalla, the final Ethereum 2.0 testnet.
After Ethereum 2.0 is fully launched, miners will be gradually eliminated from the network and users who participate in the network will be rewarded. The incentive mechanism will enable users to benefit from their long-term Ethereum holdings.
Kelvin Koh, the co-founder of venture capital firm Spartan Black, recently stated that every stage of Ethereum will help Ethereum rise. Koh said:
“In the next 2-3 years, every stage of Ethereum 2.0 will bring Ethereum closer to its final state and will become a catalyst for Ethereum.”
Altcoin season continues
In the past three days, the rise of Ethereum and Bitcoin coincided with the fall in altcoin prices. In the short term, if altcoins show a regular upward trend, the profit-taking cycle may continue.
In previous bull markets, the prices of mainstream cryptocurrencies and smaller altcoins have an inverse relationship, which means that as the price of Bitcoin soars, the price of altcoins drops.
When Bitcoin prices stabilize or consolidate, the opposite is true. This forms a loop that allows Ethereum and Bitcoin to benefit from multiple profit-taking altcoins.
Satoshi Flipper, a popular trader on Twitter, said that in the long term, Ethereum’s main resistance is at $780.
Whether Ethereum 2.0, the profit-taking of altcoins, and the growth of DeFi can push the price of Ether to a higher resistance zone remains to be verified. At present, in the medium term, the overall sentiment surrounding altcoins is still optimistic.