There I Said It, Ethereum Is Overshadowing Bitcoin
I’ve long thought that Bitcoin’s value to the cryptocurrency market was it’s stable presence. What I mean it, cryptocurrency is a new and evolving technology, we’ve seen how that can affect the basis for prices, and having the “one coin to rule them all” so to speak has been good. It’s let us focus on one technology that works while the market figures out which technology will work best next. For a long time it looked like Ethereum would be that technology. Despite a number of years of delays and false starts that is proving to be true. Not only is Ethereum on the verge of its 2.0 revolution, the revolution that will begin unlocking the true promise of the network, it’s got another tailwind. DeFi.
DeFi is decentralized financing. In the simplest terms its a means of collateralizing blockchain, coins and tokens in a way that facilitates lending. Lending means loans and that means interest payments, cash flow, and profits. When it comes to DeFi there are several protocols to rely on, the salient point for investors and traders in cryptocurrency is that Ethereum and ERC-20 token protocols are the leading basis for DeFi business. The most visible DeFi start-up is MakerDai. Maker is an Ethereum-based protocol that allows users to collateralize ETH in order to take out a loan in Dai.
What this means to ETH prices is that 1) ETH is getting bought up and/or hoarded by miners getting ready to stake their ETH 2.0 POS operations 2) ETH is getting tied up in DeFi networks as users take out loans in DAI and other coins and 3) there is an influx of speculative buying as traders bet on points 1 and 2, and use money from their DAI loans to buy more ETH. Bottom line, we’ve got a powerful rally in play that could easily take ETH to its all-time-high.
Over the weekend, ETH/USD accelerated to ballistic quality advancing more than $100 or very close to 100% in only a week. The move has price action trading above the previous and long-standing 1-year high and on track to hit a more-than two year high very soon. The two-year high, near $365, is important for traders because it will open the door to price levels like $600, $800 and $1200. The risk, and there is always risk with crypto, is that some of the rally is speculative, and that speculation is driven by leveraged buying via DeFi lenders. While still early in the move, the stage is set for a giant bubble that will eventually burst. The question is when, and at what price level?