In the recent correction, the price of Ethereum’s native cryptocurrency, Ethereum (ETH), fell more than Bitcoin (BTC).
After reaching Coinbase’s all-time high, the price of Bitcoin dropped sharply by more than 9% within a few hours. During the same period, with the market’s correction, Ethereum corrected by more than 11%.
Due to the launch of the Ethereum 2.0 upgrade network, the substantial correction of Ethereum is surprising. On December 1, the ETH 2.0 beacon chain was released on the mainnet, which marked an important milestone for Ethereum.
What caused the sharp correction of Ethereum?
ETH 2.0 is a key network upgrade of the Ethereum blockchain, which can improve its scalability and transaction processing capabilities. Before the upgrade, the network was able to process approximately 15 transactions per second.
After the upgrade, Ethereum will be able to scale to handle thousands of transactions per second, and in the long run, it may be more in sharding.
For the Ethereum network, this is a fundamentally optimistic upgrade, as it will allow decentralized applications to run without scalability barriers. It will also make the new decentralized financial cycle more sustainable, thereby improving the user experience.
Since the market tends to buy rumors and sell news, a correction in the price of Ethereum after the ETH 2.0 upgrade can be expected. For example, when the ETH 2.0 upgrade was confirmed in late November, the price of Ethereum also fell from around $620.
Despite this, the price of Ethereum dropped by 11% in just two hours, and many traders were caught off guard. The importance of the ETH 2.0 upgrade and its impact may lead the market to expect Ethereum to have more short-term flexibility.
After the release of the beacon chain, industry executives are also very optimistic about the medium and long-term growth trajectory of Ethereum. This may increase the overall positive market sentiment surrounding ETH.
Joseph Lubin, co-founder of Ethereum and founder of ConsenSys, described ETH 2.0 and Proof of Stake as a landmark upgrade. He said:
“The release of the ETH 2.0 beacon chain is a feature of the emerging open source spirit. It first attracted so many people to Ethereum. Now, more than 27,000 validators from around the world are participating in the new ETH 2.0 consensus model. The proof of stake is A major upgrade of cryptoeconomic incentives, and these incentives have made Ethereum an automated and objective basis for trust. Together, we are deepening our commitment to building the largest decentralized network.”
What is Ethereum going to do next?
Traders expect a greater correction in the near future, or at least a period of consolidation. When Bitcoin suddenly fell, the futures market was hit hard, causing chaos in the entire derivatives market.
An anonymous trader named “TraderKoz” said that once Ethereum consolidates above $620 again, it will become attractive. If the correction continues, the $561 level will remain a key support level for Ethereum in the short term. The trader said:
“Ethereum opened at a good price on Monday. We wouldn’t be surprised if Ethereum consolidates within a moderate range for a while. Once the price of Ethereum rises above $620, I will be interested in more long positions.”
