Ethereum price: Upswing may be on the cards as ETH continues leaving exchanges
Even with exchange ETH reserves plummeting, Ether prices remain stable... for now.
- Between 14-15 January, ETH reserves across centralised crypto exchanges dropped by a whopping 20%.
- Experts suggest that the drop could, in part, have been caused as a result of more and more Ether making its way on to various decentralised protocols such as Uniswap.
- Miners may also be aggressively accumulating ETH as the Ethereum network prepares to transition to a Proof-of-Stake (PoS) framework.
On 12 January, Ether (ETH) recorded a massive 24-hour drop of 32%, sending the value of the premier cryptocurrency to a relative low of $910. The plunge came soon after the altcoin looked primed for another major upward push and was just $70 shy of reaching its all-time high value, sitting at $1,350. However, since then, ETH has showcased an increasing amount of stability, currently trading around $1,200 for more than 72 hours running.
That being said, in the wake of Ether’s increasing perceived stability it has recently come to light that the total volume of ETH held across all centralised exchanges has plunged by 27%, with data released by blockchain analytics firm CryptoQuant indicating that just 8.1 million ETH is currently sitting in the reserves of all such trading platforms.
In this regard, some analysts pointed out that between 14 -15 January alone, a massive 20% drop in Ether reserves across all regulated exchanges was witnessed, while prominent data providers such as Glassnode suggest that Ether reserves have not been this low since July 2018.
To gain more clarity regarding this development, Gaurav Dahake, CEO of cryptocurrency exchange Bitbns, pointed out to Finder that one of the primary reasons for Ether’s dropping volumes across most centralised exchanges can be attributed to the fact that an increasing amount of ETH is being withdrawn and transferred to decentralised protocols like Uniswap where liquidity is locked in different trading pairs.
Furthermore, there is a big possibility that miners may be accumulating the second-largest cryptocurrency by total market capitalisation since there is a chance that the Ether network may make its much-awaited switch to a POS (Proof-of-Stake) set-up sometime this year, which essentially means that mining will only be profitable for participants if they stake a significant amount of ETH. On the subject, Sidharth Sogani, CEO of blockchain analytics firm Crebaco Inc. highlighted:
“Mining demand is increasing but there is almost no stock for the most efficient graphic cards available worldwide, as a result of which GPU costs have almost doubled. When miners get involved in the market, it's always good. I see ether hitting 2,000 USD in the next 30 to 45 days. Also, there is a possibility of POS launching soon within the Ether network, which could be another reason why miners are accumulating ETH.”
Is Ethereum’s value proposition more attractive than Bitcoin’s?
Even though Bitcoin and Ethereum seem to have been two of the prime beneficiaries of the recent bull run witnessed by the industry, an increasing number of investors are now beginning to see that there is a massive difference in the value proposition put forth by the two offerings. For example, while Bitcoin is clearly the market "OG", its price seems to be governed by the "strict supply and elastic demand" model (with an overlay of perceived value). On the subject, Sam Tabar, co-founder of Fluidity (creators of AirSwap) and former head of Capital Strategy (APAC) for Merrill Lynch, opined:
“It is not dissimilar to gold, but in digital format. That is one of the main reasons why BTC has gone up in value, as a hedge against the US dollar which is what gold used to do. Obviously, BTC is much easier to hold than gold. Not that many people want to put gold bars under their mattresses or in their pockets to hedge themselves from the increasing worthlessness of the US dollar.”
Ethereum, on the other hand, seems to be like a swiss jackknife of crypto coins according to Tabar, having the potential to serve as a new decentralised computing network that can potentially revamp the entire financial system if deployed in that direction. The same cannot be said for Bitcoin due to its lack of programmable functionality.
And while a lot of investors from the realm of traditional finance as well as from the digital asset industry tend to routinely lump BTC and ETH together under the umbrella term "crypto", it seems as though with time, Ether’s programmatic capabilities (à la "smart contracts") will set the two offerings apart in a big way, with Tabar highlighting: “People are going to realize ETH is the smarter one to hold. Once enough crypto investors understand this, the correlation between ETH and BTC will fall apart. You can already see how banking partnerships are slowly taking place within the Ethereum ecosystem.”
Ethereum is on its way up
While Bitcoin has been grabbing the bulk of the headlines in terms of institutional adoption, just a few months ago, banking giant JP Morgan took a board of directors seat with ConsenSys, the world's largest Ethereum software company. What this seems to allude to is the fact that an increasing number of stakeholders operating within the traditional finance system are realising that they can use Ethereum to re-write today’s banking set-up entirely.
Also, Sogani believes that a core reason that may be holding Ether from breaking out is the fact that ETH OTC (over the counter) markets are not very evolved, as a result of which most OTC deal makers have to buy the altcoin from exchanges, adding:
“The moment they enter the market, prices will start going up. I expect a sudden pump in the price of ETH by 20-30% over the next few weeks. A stable range in my opinion would be around 1,750 USD.“
Sogani’s aforementioned price assessment in regard to ETH is also shared by Tyler Winklevoss, co-founder of the cryptocurrency exchange Gemini, who believes that Ether is one of the most “underpriced” cryptocurrencies in the market today.
Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, see how to keep your crypto safe with our end to end guide to cryptocurrency security and dive deeper with our simple guide to DeFi.
Disclosure: The author owns a range of cryptocurrencies at the time of writing