Ethereum spiked as high as $1.1k after a 30% advance on Sunday, a level not seen since February 2018.
The market has since cooled off, back to just below the $1k level at the time of writing. But having breached psychological resistance of $1k, expectations of a continuation are heightened.
Head of Business Development at Luno exchange, Vijay Ayyar, attributed the move to Bitcoin’s epic run of form. He said investors are cycling BTC profits back into other tokens, with Ethereum being the primary beneficiary.
“What we’re seeing is the standard moving of the crypto markets from Bitcoin to the » Read more
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>Altcoin market led by Ether. This rotation happens usually when Bitcoin has a large rally and investors rotate profits” into other digital coins.”
Source: ETHUSDT on TradingView.com
The second-biggest cryptocurrency by market cap has outperformed Bitcoin over the last 12 months. It is up over 600%, versus Bitcoin’s 300% gains over the same period.
However, as Ethereum holders celebrate the price action, the issue of high gas fees, which last featured prominence during the summer of DeFi, rears its head once again.
Tushar Jain, the Managing Partner at Multicoin Capital, said a Uniswap trade currently costs $100. He went on to say that this situation is leading to “anti-network effects.” All in all, Jain believes the Ethereum network is now incapable of adequately supporting DeFi usage.
“Ethereum is suffering from anti-network effects. Each new user makes the system less usable for other users by crowding them out. For example, it currently costs ~$100 in gas to trade on Uniswap. Simply sending some ETH around costs ~$10. DeFi has outgrown Ethereum.”
Gas Fees Spike on Ethereum
Gas fees are an essential component of the Ethereum network. They refer to a unit of measure that equates to the computational effort needed to execute certain network operations.
“Gas prices are denoted in Gwei, which itself is a denomination of ETH – each Gwei is equal to 0.000000001 ETH (10-9 ETH). For example, instead of saying that your gas costs 0.000000001 Ether, you can say your gas costs 1 Gwei.”
Average gas fees yesterday hit a figure of 177 gwei, which is still much lower than the average gwei seen during the summer of DeFi.
However, the price of Ethereum was also much lower in the summer, ranging from between $200 and $400.
Gas fees are calculated in relation to the price of Ether. Therefore, the higher the price of Ether, the more users pay in gas costs.
With that in mind, in terms of network useability, the worst possible scenario would be for Ether to rocket past its all-time high and the average gas prices to reach the same levels as during the summer.
If such a situation played out, which is likely in the coming weeks and months, Jain’s point on “anti-network effects” would prove correct.
Massive Bearish Divergence Hints At First Major Chainlink Corrective Phase
Chainlink was among the first cryptocurrency to set a new all-time high in 2020, but given its absence during the 2017 peak was facing different circumstances and no overhead resistance. The » Read more
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin was nearly unaffected entirely by the » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market over the last couple of years, breaking record after record.
However, a massive bearish divergence has formed as the unstoppable cryptocurrency touches an ascending trendline for the third time. Could this be the start of the » Read more
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin’s first extended » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear phase? Or are bulls preparing a much stronger push to finally blast through the long-term trendline?
Chainlink At Risk Of First Major Corrective Phase, According To » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>Bear Div
In 2017, Bitcoin’s meteoric rise and the explosion of ICOs built on Ethereum put the cryptocurrency asset class on the map. But after a storm of exuberance and parabolic price action, the bubble burst and these assets came crashing down by as much as 90% or more in many cases.
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market. During that time, however, Chainlink made its debut in the crypto space, and its been on an unstoppable uptrend ever since.
The » Read more
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin rose from nearly worthless to over $25 recently at its 2021 peak. Chainlink went from being born during a » Read more
” href=”https://www.newsbtc.com/dictionary/bear/” data-wpel-link=”internal”>bear market, to hitting all-time highs left and right even before a bull market was confirmed.
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin remains near 2021 highs.
— 🌏The EW Guy (@TheEWGuy) January 25, 2021
Bearish Divergence, Or Are Bulls Baiting For The Next Move Up?
The recent push to $25 per token, has resulted in a massive bearish divergence on the weekly Relative Strength Index, spanning across the current peak and the 2020 high of $20, according to one crypto trader.
Coinciding with the bearish technical signal, is a more three-year long trendline that has acted as the top to every major rally. The chart below shows the long-term trendline on the LINKUSDT trading pair on Binance more clearly.
A massive bearish divergence spans across two years of LINKUSDT price action | Source: LINKUSDT on TradingView.com
Bearish divergences appear when price action sets a higher high, but a technical indicator on the same timeframe chart makes a lower low. It often suggests that although prices are reaching new highs, the underlying buying pressure is lower than during the first peak.
The weakness results in bears taking over, and forcing prices lower. Bearish divergences often appear at the top of a trend, but are difficult to act on.
Related Reading | Altcoin Expert: Buy Crypto That Holds Up During Bitcoin Breakdown
Bearish divergences are only confirmed once price action has turned down. The lack of a higher high on a technical indicator could merely be due to the fact the bullish move is only yet just beginning. Taking a position in a long up-trending » Read more
” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin due to a bearish divergence could lead to any missing out on any additional legs up that might follow.
Given Chainlink’s long-term momentum, the bearish divergence – if invalidated – could supply the momentum needed for a much stronger push higher.
Featured image from Deposit Photos, Charts from TradingView.com