After an impressive 72 hour rally, Ether’s price has crashed by as much as 7% over the past 24 hours, spelling trouble for ETH bulls.
At the time of writing ETH is trading at $1,318 and is down 4.31% despite finally breaking past its 2018 all-time high price of $1,428 yesterday. Three factors help explain the sudden and sharp correction.
The depreciation in Ethereum’s value corresponds to a poor day for the top five DeFi assets with almost all of them trading down over the past 24-hours by at least three percent, data from Messari Research shows. UNI, AAVE, SNX, MKR and YFI are all reporting losses over the past day. All five of the DeFi assets began to see a shift towards losses early on Wednesday, January 20 near the same time as ETH’s descent.
This may be only the beginning of Etheruem’s troubles, as developers have started to explore alternatives to the Ethereum blockchain. While Ethereum 2.0’s beacon chain recently launched with promises of curbing congestion and lowering fees, the ETH team still has a long road ahead before they have a fully functional and scalable sharded blockchain. Already in Janurary fees on the network have hit an all-time average high of $9.79.
Emerging as one of the leading Ethereum competitors is Solana, which launched its mainnet in beta in March 2020. The project has received crucial support, including from CEO of FTX Exchange Sam Bankman-Fried who announced that Solana would be home to a new decentralized derivatives exchange, Serum. In addition to grabbing the attention of new projects, platforms like Cryptokitties have already moved to Solana to avoid the operations hurdles that come with Ethereum.
The final factor to pull ETH to its price lows today is the slow-down of Bitcoin’s weeks-long rally. Bitcoin and the rest of the altcoin market had been rallying in tandem as BTC started the week off strong at $38,360 and by the middle of the week BTC was pushing its recent resistance level at $40,000, but the leading cryptocurrency has fallen back down to $34,737 as of writing. The Bitcoin market took another hit early this week when analysts at JP Morgan Chase wrote that Bitcoin needed to break above $40,000 soon or face an even harsher correction.
Ethereum bulls had been optimistic as ETH remained strong even as Bitcoin started to fade, but ETH has since followed Bitcoin’s suit.
By Emily Mason