Ethereum price slides as signs of “the flippening” begin to fade
Over the past month or so, ETHs losses have closely mirrored those registered by BTC.
- Analysts believe that it will become increasingly difficult for ETH to hold on to its current price levels as the US Federal Reserve looks to taper its existing stimulus framework.
- Ethereum's market dominance index (DI) has fallen from 21% to 19% over the past week.
- An increasing number of ETH-centric projects are beginning to employ the use of zero-knowledge (ZK) rollup solutions to mitigate the network's ongoing gas fee problems.
After having shown visible signs of decoupling, Ethereum, the world's second-largest cryptocurrency by total market capitalisation, has registered substantial losses of 7% over the last 7 days — something that's in line with the general trend of the market. At press time, ETH is trading at a price point of AUD$5,550.
As an overall bearish mood continues to engulf the crypto sector, it seems as though it may become increasingly difficult for ETH to hold on to its key support level of AUD$5,600 (US$4,000), especially with the altcoin's technical and fundamental indicators suggesting that a further sell-off may be on the horizon.
After scaling up to an all-time high of AUD$6,800 (US$4,900) earlier in November, ETH's value has dipped by nearly 20% — much in line with BTC whose value has dropped by approximately 24% over the same period — suggesting that the altcoin is still largely following the movements of the flagship crypto.
Another downturn may be witnessed in the near term
Fears of increased dips in the value of ETH have been compounded by the fact that the US Federal Reserve is set to commence a 2-day policy meet come 14 December. The central bank will look to assess how quickly it needs to taper its US$120 billion-a-month asset purchasing program so as to gain some sort of financial freedom and hike interest rates once again.
The Fed also revealed recently that it is looking to scale back its bond-buying pace by around US$15 billion a month, pointing to the fact that the ongoing stimulus could very well come by June 2022. However, with inflation numbers reaching a 40-year high recently, coupled with mounting job losses, officials believe that the tapering may need to be initiated before its official deadline to prevent the American economy from being on the receiving end of even more damage.
Following the "loose stimulus fiscal policies" initiated by President Biden post-March 2020, ETHs price proceeded to surge by an insane 3,000+%. However, with these policies now seemingly coming to an end, there is a chance that the altcoin may take a value hit over the coming few months.
ZK-rollups to permanently solve ETHs scalability woes?
There's no denying that the Ethereum network has continued to be plagued with increasing scalability and transactional throughput issues over the last couple of years despite its recent upgrades, as is highlighted by the platform's high gas fees.
However, as per many crypto pundits, the final piece to this puzzle may come in the form of ZK-rollups, a digital scaling framework that helps process transactions off the central chain, allowing for decreased network congestion. Projects that have already started to use this technology include dYdX (a prominent decentralised perpetual and futures exchange), Loopring and zkSync, among others.
Disclosure: The author owns a range of cryptocurrencies at the time of writing.