What a week for Ethereum! In the last 7 days, the value has increased by 50%, from 1000 to 1500 euros. What is going on and what can you expect? And why could Ethereum Classic (ETC) emerge as a real winner?
From the bottom to here
The crypto market may be in a deep bear market with companies collapsing left and right, but certain cryptos like Ethereum are experiencing a nice rebound. The bottom of the Ethereum price was at 1000 euros at the beginning of this 7-day period and rose to over 1500 euros. Drake no doubt had Ethereum in mind at the time when he sang: we started from the bottom, now we’re here.
Getting the short end of the stick
According to statistics from Glassnode, the rise last week was helped by a large number of short positions not being achieved. These are contracts from traders who expect the price to fall, but if the price rises as it is now, then these traders have to supplement their collateral by buying more ethers. If they do not do so, they run the risk of having their position liquidated and losing everything.
If a position is liquidated then these traders are forced to buy ether at higher prices than they had gambled on in their short contract. If they want to avoid this, they will have to replenish the collateral for their position. The problem for these traders is that if they buy ether to replenish their collateral, they will immediately cause the price to rise instead of fall, and thus their position will only deteriorate.
Because shortsellers exit their positions with buy orders, the exit of these shortsellers drives prices up. In turn, the price increase causes buyers to actually become interested in Ethereum. The combination of new buyers and panicked shortsellers can thus cause a rapid rise in price, as we have seen in the past 7 days.
Whales make rebound
According to analysis company Santiment, the trend looks good for Ethereum. Not only is the price rising, but blockchain data shows that the number of addresses with between 1,000 and 100,000 ETH has increased since the beginning of May.
“Ethereum has recovered fairly well in July, up +29% for the month and +14% just in the past 24 hours. In addition, there has been an increase in key 1000 to 100,000 ETH addresses since the beginning of May, where 131 new whale addresses have appeared on the network.”
What are these whales doing with their ethers?
There are speculators here, of course, but right now addresses with a large number of Ethereum are mainly used to stake ethers on the beacon network, which uses proof of stake. This is a kind of a second blockchain that runs in parallel to the existing proof of work blockchain that all apps run on.
The increases in the price and the number of large addresses have to do with the future merger of these two blockchains, this merger is called the merge. The merge is expected to take place on September 19, according to Ethereum developer Tim Beiko. It will only go ahead if the final test on August 11 is successful.
Does Ethereum Classic win?
After the merge, Ethereum consists of one blockchain again. This is where all decentralized apps run and proof of stake is used. The purpose of this switch is to ensure that the Ethereum network uses less energy.
Currently, like Bitcoin, the network runs on miners that consume an awful lot of energy. According to expectations, energy consumption will drop by more than 99% after the merge.
Mining will no longer be possible so miners will have to find another hobby to expend their energy. It is quite simple for miners to switch to Ethereum Classic, so perhaps ETC will end up as the big winner, especially if proof of stake suffers from teething problems.
Traders see this too and that’s why the price of ETC has done even better than that of Ethereum over the past 7 days. Where Ethereum rose by 50%, Ethereum Classic showed a rise of 80%.
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