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Ethereum Shoots Past $1k But High Gas Fees Still a Problem

Blockchain

Ethereum Shoots Past $1k But High Gas Fees Still a Problem

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 […]

Published

3 weeks ago

on

January 4, 2021

By

Republished by Plato

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.”

Ethereum daily chart

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.

Ethereum gas costs

Source: etherscan.io

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.

Source: https://www.newsbtc.com/news/ethereum/ethereum-shoots-past-1k-but-high-gas-fees-still-a-problem/

Related Topics:altcoins Bitcoin blockchain BTC Business Coins Crypto Crypto Markets Cryptocurrency DeFi ETH ether Ethereum investors Markets Tokens Uniswap

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Blockchain

Massive Bearish Divergence Hints At First Major Chainlink Corrective Phase

Published

4 hours ago

on

January 26, 2021

By

Republished by Plato

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.

Even the crypto asset with the most longevity, Bitcoin, fell a full 84% from high to low, resulting in a three year » Read more

” 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.

Since things turned bullish, even Chainlink joined in Bitcoin and Ethereum and set yet another record peak. The entire market has once again turned back down, but the soaring » Read more

” href=”https://www.newsbtc.com/dictionary/altcoin/” data-wpel-link=”internal”>altcoin remains near 2021 highs.

$LINK, 🧐 pic.twitter.com/bKsLeUgnsi

— 🌏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.

chainlink linkusdt bear div

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.

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

Source: https://www.newsbtc.com/analysis/link/massive-bearish-divergence-hints-at-first-major-chainlink-corrective-phase/

Blockchain

3 reasons why Ethereum price is still on track to top $2,000

Published

5 hours ago

on

January 25, 2021

By

Republished by Plato

After dropping 27% over three days, Ether (ETH) price finally reached a bottom at $1,040 on Jan. 22.

The sharp correction liquidated $600 billion worth of future contracts but interestingly, Ether price rebounded to a new all-time high even as Bitcoin price continues to trade in a slight downtrend.

According to Cointelegraph, the increasing TVL and transaction volumes of the decentralized finance sector are behind Ether’s impressive surge.

*ETH/USD 4-hour chart. Source: TradingView*

To determine whether the recent pump reflects a potential local top, we’ll take a closer look at on-chain flows and derivatives data.

Exchange withdrawals point to whale accumulation

Increasing withdrawals from exchanges can be caused by multiple factors, including staking, yield farming, and buyers sending coins to cold storage. Usually, a steady flow of net deposits indicate a willingness to sell in the short-term. On the other hand, net withdrawals are generally related to periods of whale accumulation.

*ETH held in exchange wallets. Source: Cryptoquant.com*

As the above chart shows, on Jan. 23, centralized exchanges recently reached their lowest Ether reserve levels since November 2018.

Although there is some discussion whether part of this Ether exodus is an internal transfer between Bitfinex cold wallets, there has been a clear net withdrawal trend over the past month. Despite these ‘rumors’, the data points towards accumulation.

This data also coincides with the DeFi’s total value locked (TVL) reaching a $26 billion all-time high and signals investors chose to take advantage of the lucrative yield opportunities that exist outside of centralized exchanges.

Futures were overbought

By measuring the expense gap between futures and the regular spot market, a trader can gauge the level of bullishness in the market.

The 3-month futures should usually trade with a 6% to 20% annualized premium (basis) versus regular spot exchanges. Whenever this indicator fades or turns negative, this is an alarming red flag. This situation is known as backwardation and indicates that the market is turning bearish.

On the other hand, a sustainable basis above 20% signals excessive leverage from buyers, creating the potential for massive liquidations and eventual market crashes.

*March 2021 ETH futures premium. Source:* *NYDIG Digital Assets Data*

The above chart shows that the premium peaked at 6.5% on Jan. 19, equal to a 38% annualized rate. This level is considered extremely overbought, as traders need an even higher price increase ahead of expiration to profit from it.

Overbought derivatives levels should be considered a yellow flag, although maintaining them for short periods is normal. Traders might momentarily exceed their regular leverage during the rally and later purchase the underlying asset (Ether) to adjust the risk.

One way or another, the market adjusted itself during the Ether price crash, and the futures premium currently stands at a healthy 4.5% level, or 28% annualized.

Spot volume remains strong and traders bought the dip

In addition to monitoring futures contracts, profitable traders also track volume in the spot market. Typically, low volumes indicate a lack of confidence. Therefore significant price increases should be accompanied by robust trading activity.

*ETH aggregate spot exchanges volumes. Source: Coinalyze.net*

Over the past week, Ether has averaged $6.1 billion in daily volume, and while this figure is far from the $12.3 billion all-time high seen on Jan. 11, it is still 240% higher than December’s. Therefore, the activity supporting the recent $1,477 all-time high is a positive indicator.

Exchange-provided data highlights traders’ long-to-short net positioning. By analyzing every client’s position on the spot, perpetual and futures contracts, one can obtain a clearer view of whether professional traders are leaning bullish or bearish.

With this said, there are occasional discrepancies in the methodologies between different exchanges so viewers should monitor changes instead of absolute figures.

*Exchanges top traders ETH long-to-short ratio. Source: Bybt.com*

The top traders index at Binance and Huobi have held roughly the same Ether position over the past couple of days. Huobi’s average over the past 30 days has averaged a 0.83 long-to-short ratio while at Binance traders held a 0.94 average. The current reading at 0.85 indicates a slight negative sentiment.

OKEx stands out as the top traders long-to-short ratio peaked at 2.0, strongly favoring longs in the early hours of Jan. 22, but it decreased until Jan. 24 and finally bottomed at 1.05. The strong net selling trend was reverted today as traders bought the dip and the indicator flipped to 1.17 in favor of longs.

One should keep in mind that arbitrage desks and market makers encompass a vast portion of the exchanges’ top traders metric. The unusually high futures premium would incentivize those clients to create short positions in futures contracts while simultaneously buying Ether spot positions.

Considering Ether’s on-chain data indicating whales hoarding, along with the healthy futures contracts premium, the market structure seems reliable.

The fact that top traders at OKEx also bought today’s dip is further indication that the rally should see continuation.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.

Source: https://cointelegraph.com/news/3-reasons-why-ethereum-price-is-still-on-track-to-top-2-000

Blockchain

Bank Of Singapore: Bitcoin Could Succeed As A Store Of Value

Published

6 hours ago

on

January 25, 2021

By

Republished by Plato

The Singaporean private banking arm of OCBC Bank has dismissed the chances of cryptocurrencies eventually replacing fiat currencies as a medium of exchange. However, the large institution believes that BTC and other altcoins can replace gold in terms of serving as a store of value.

Cryptocurrencies: Store Of Value; Not Medium Of Exchange

Ever since the introduction of Bitcoin in the late 2000s, people have wondered if the cryptocurrency could indeed live up to the potential of operating as an electronic peer-to-peer cash system, as intended by the anonymous creator – Satoshi Nakamoto.

Doubters have breached the infamous volatility as a significant obstacle in BTC’s path. It seems that the Bank of Singapore agrees with this narrative, according to recent coverage.

Chief economist Mansoor Mohi-uddin used the movements from the past year, where BTC went from a low of $4,000 during the mid-March liquidity crisis to a new all-time high above $40,000 months later, to exemplify it and dismiss this narrative.

However, bitcoin and other altcoins can have a role as a digital store of value if they manage to address several potential issues. Apart from the aforementioned price fluctuations, those include high liquidity and safe custodians.

“First, investors need trustworthy institutions to be able to hold digital currencies securely. Second, liquidity needs to improve significantly to reduce volatility to manageable levels.” – explained the economist.

Additionally, the crypto ecosystem requires more regulations from world watchdogs to reduce their alleged involvement in criminal activities. However, Mohi-uddin warned that if governments felt threatened by the existence of particular digital assets, they could fight back, which is the case with the growing trend of central bank digital currencies.

Institutional Adoption Highlights BTC’s Store Of Value Qualities

The bank’s economist explained that the growing appetite from institutional investors had supported the belief that bitcoin should be used as a store of value instead of a medium of exchange. Furthermore, some of them even outlined the idea that BTC could replace gold or it’s better than the precious metal in a way.

SkyBridge Capital co-founder Anthony Scaramucci recently asserted that the largest cryptocurrency is easier to store, harder to steal, more portable, and ultimately, better than gold.

CIO at the Wall Street behemoth BlackRock, Rick Rieder, predicted that BTC could take some of the market share of the yellow metal and eventually even replace it.

Similarly, JPMorgan’s analysis concluded that the cryptocurrency has started to garner some of gold’s market share, which could harm the bullion’s price in the long-run.

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Source: https://cryptopotato.com/bank-of-singapore-bitcoin-could-succeed-as-a-store-of-value/