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The price of Ether (ETH), Ethereum’s native cryptocurrency, has plunged harder than Bitcoin (BTC) in the recent pullback.
After hitting an all-time high on Coinbase, the price of Bitcoin fell over 9% in a matter of hours. During the same period, Ether corrected by more than 11%, following a market pullback.
The deep fix in Ether is a surprise due to the launch of the Ethereum 2.0 network upgrade. On December 1, the Eth2 beacon chain was released to the mainnet, marking a milestone for Ethereum.
What led to Ether’s sharp correction?
Eth2 is a key network upgrade for the Ethereum blockchain that improves its scalability and transaction capacity. Prior to the upgrade, the network was able to process approximately 15 transactions per second.
After the upgrade, Ethereum will be able to scale to thousands of transactions per second, potentially more with sharding in the long run.
This is a fundamentally optimistic upgrade for the Ethereum network, as it will allow decentralized applications to function without the barriers of scalability. It would also allow new decentralized funding rounds to become more sustainable, thus facilitating the user experience.
The Ether correction after upgrading Eth2 could have been expected due to the market’s tendency to buy rumors and sell news. For example, when the Eth2 upgrade was confirmed at the end of November, the price of Ether also dropped by around $ 620.
Still, the 11% drop in the price of ether in just two hours caught many traders off guard. The importance of upgrading Eth2 and the implications it carries have likely led the market to expect greater near-term resilience from Ether.
Industry leaders have also been very optimistic about Ethereum’s medium to long-term growth path following the release of Beacon Chain. This probably added to the overall positive market sentiment around ETH.
Joseph Lubin, co-creator of Ethereum and founder of ConsenSys, described Eth2 and the Proof of Stake as a monumental upgrade. he said:
“The launch of the # Eth2 Beacon Chain is characteristic of the emerging, open-source ethos that is attracting so many people to Ethereum. Over 27,000 validators around the world are now participating in the new # Eth2 consensus model. Proof of Stake is a monumental upgrade to the crypto-economic incentives that already make Ethereum an automated and objective trust base. We collectively deepen the commitment to build a decentralized network as much as possible. “
What’s next for Ether?
Traders anticipate a deeper short-term pullback, or at least consolidation. The futures market was hit hard when BTC dropped sharply, wreaking havoc in the derivatives market.
A pseudonymous trader known as “TraderKoz” said Ether will become convincing once it consolidates again above $ 620. The $ 561 level remains a key support level for ETH in the near term if the pullback continues. The merchant said:
“We get a nice PA forming around the Monday beach and a nice tag from the Weekly Open. I wouldn’t be surprised if we consolidate the midrange a bit here. I will be interested in more longs once we trade above $ 620. “
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