The price of ether, the native currency of the network Ethereum, it shoots up around 3 percent and returns to the area of all-time highs, above $ 4,700. But analysts believe there is enough momentum to conquer the psychological high of $ 5,000.
So far this year, the price of this cryptocurrency multiplied its value by six and far exceeded the increase of 127 percent that marked bitcoin.
According to finance.com, the possibility that the ethereum network was one of the great beneficiaries of the expansion of the metaverse was one of the factors that drove the latest advances in ether.
The metaverse is a phenomenon that consists of creating virtual environments, similar to what Second Life was. But the difference is that in the new metaverse there are a series of digital assets that can be exchanged, specifically NFT assets (non-fungible tokens).
In addition, bitcoin is in the midst of an upward cycle and since the correlation of all cryptographic assets with this currency is very high, ether is benefiting.
The Defi 2.0 as a bullish lever for Ethereum
However, the main reason to explain the rises in ether is “the rise of DeFi 2.0, which are financial services related to the field of investment and the capital market,” he said. Alberto Toribio, ambassador of cryptoplaza.
It is the second generation of decentralized finance protocols and the main difference is that they generate their own capital instead of incentivizing third parties to deposit it in the protocol itself.
For example, the protocol Olympus, one of the best known, aims to create a currency that behaves more or less like gold, whose name is OHM: To issue this coin, collect ethers and return the same amount to users with an interest, but in the OHM itself.
Black hole of liquidity
It is a kind of liquidity black hole, in the sense that it attracts funds from the market. In this way, a large part of the ether ends up in the hands of the protocols, “with which there is a shortage of coins and they rise in price,” said Toribio.
Obviously, they can do this because these protocols tied to DeFi 2.0 offer users very high passive throughputs.
“They will not always offer this profitability but now they are in an expansionary phase and they can do it, with which they have a direct impact on the price,” said Toribio.
Long-term bullish trend
With these fundamentals supporting the price, the truth is that the market continues to bet on the continuation of the bullish rally in ether.
“We will see how ether and the entire altcoin market move faster than bitcoin itself,” he said. Vjay Ayyar, broker’s Asia Pacific investment director The moon.
In the minds of investors is the round and psychological level of $ 5,000. He thinks so, Wildred Daye, director of Securitize Capital, Although before the currency will face resistance at $ 4,900, where downward pressure could be felt.
However, after the strong rise in ether, it would be normal for the price to take a break before the assault on the all-time highs.
Bitcoin rises after Taproot update
The ether rally could have been more if bitcoin had more determinedly supported the advances, which is what was expected. But the world’s most popular digital currency barely rebounded 1%.
The reason is that “the Taproot update was launched this Monday, which initially had little impact on the price,” he said. Craig Erlam, firm analyst Oanda.
The update, while large for bitcoin, “has taken a long time to come about, so it was probably heavily discounted,” said this expert. In his opinion, the rally suffers from a certain exhaustion.
However, the recent rally of bitcoin and ether shows that the fundamentals of the market withstood the pressures received just before the summer, when the Chinese authorities decided to prohibit the trading of cryptocurrencies.