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The price of Ether (ETH), Ethereum’s native cryptocurrency, plummeted stronger than Bitcoin (BTC) in the recent pullback.
After hitting an all-time high on Coinbase, Bitcoin’s price dropped dramatically by more than 9% in just a few hours. Over the same period, Ether corrected by more than 11%, following a market pullback.
The deep correction in Ether comes as a surprise due to the launch of the Ethereum 2.0 network update. On December 1st, the Eth2 Beacon Chain was released on the mainnet, marking an important milestone for Ethereum.
What led to Ether’s strong correction?
Eth2 is a key network upgrade for the Ethereum blockchain that improves its scalability and transaction capacity. Before the upgrade, the network was able to process approximately 15 transactions per second.
After the update, Ethereum will be able to scale to thousands of transactions per second, potentially more with long-term sharding.
This is a fundamentally optimistic update for the Ethereum network because it will allow decentralized applications to function without the barriers of scalability. It would also allow new decentralized finance cycles to become more sustainable by facilitating the user experience.
The correction of Ether after the Eth2 update could have been expected due to the market trend to buy rumors and sell news. For example, when the Eth2 update was confirmed in late November, the price of Ether similarly dropped by around $ 620.
However, the 11% drop in the price of Ether in just two hours caught many traders off guard. The importance of the Eth2 upgrade and the implications it entails likely led the market to expect greater short-term resilience from Ether.
Industry executives have also been very optimistic about Ethereum’s medium- and long-term growth trajectory following the release of Beacon Chain. This likely added to the overall positive market sentiment around ETH.
Joseph Lubin, co-creator of Ethereum and founder of ConsenSys, described Eth2 and proof-of-stake as a monumental upgrade. He She said:
“The launch of the # Eth2 Beacon Chain is characteristic of the emerging, open-source ethos that attracts so many to Ethereum in the first place. More than 27,000 validators from around the world are now participating in the new # Eth2 consensus model. Proof of Stake it is a huge upgrade of the crypto-economic incentives that already make Ethereum an objective and automated basis for trust. We are collectively reinforcing the commitment to build a fully decentralized network. “
What’s in the future of Ether?
Traders expect a deeper decline in the near term, or at least a consolidation. The futures market took a big hit when BTC slumped sharply, causing chaos in the derivatives market.
A pseudonymous trader known as “TraderKoz” said that Ether will become attractive once it consolidates above $ 620 again. The $ 561 level remains a key support level for ETH in the short term if the pullback continues. The dealer She said:
“We’re forming a nice PA around the Monday range and a nice weekly opening tag. I wouldn’t be surprised if we consolidate the mid range here for a while. I’ll be interested in longer once we trade above $ 620.”
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