Has Ethereum (ETH) Broken the Curse?

After lagging most of its peers last week, Ethereum (ETH) clinched new five-month highs on Monday, raising optimism that the developer’s cryptocurrency had overcome an existential crisis following the bursting of the ICO bubble in 2018. The crypto bear market affected Ethereum in more ways than one: the loss of reservation demand and the so-called gas problem raised the risk that ether would eventually die a slow death through economic abstraction.

Now that the market has turned, and with a newly implemented technical upgrade in hand, Ethereum appears to be in post-crisis mode.

ETH/USD Price Analysis

For the first time since November, ether’s price cleared $180 on Monday following a double-digit rally through the Asian trading session. The second-largest cryptocurrency peaked at $187.98 on Bitfinex and was last seen trading just below $180.00. During the high point of the rally, Ethereum was up 11%.

Ether’s technical picture has improved considerably in recent weeks. The price is approaching a critical bullish crossover that could spark a prolonged rally through the spring. The price has cleared the 50-day and 200-day moving averages and the shorter MA looks poised to cross the longer MA for the first time since mid-2018. The relative strength index (RSI) is overbought but the underlying picture remains overwhelmingly bullish.

In terms of market activity, ETH trade volumes eclipsed $9.4 billion on Monday, according to CoinMarketCap. FCoin, ZBG and Coineal were the largest markets.

Ethereum’s Path to Serenity

Since bottoming near $80 in December, Ethereum’s value has more than doubled thanks in large part to a highly anticipated hard fork that was finally executed in February. After several delays, Ethereum’s Constantinople and St. Petersburg upgrades went live at block number 7,280,000. Constantinople was the big upgrade, as it provided maintenance and optimization improvements to the protocol. This included implementing five Ethereum Improvement Protocols (EIPs).

Following the upgrades, Ethereum’s block reward issuance was reduced to 2 ETH from 3 ETH previously. The reduction in block reward is a stop gap measure ahead of the forthcoming Serenity upgrade.

Serenity, also dubbed Ethereum 2.0, will implement a full proof-of-stake (POS) consensus algorithm, enable 1,000x scalability through a process called sharding and boost cross-contract logic. These features are expected to make Ethereum the smart contract and decentralized application platform for the future while simultaneously addressing many of the core complaints against the protocol.

Also read How to Capitalize on Proof of Stake: Five Upcoming POS Projects that Could Shake Up Crypto.

Curse Broken?

In theory, the development of Ethereum 2.0 should increase ether’s reservation demand as the network’s overall utility improves. The transition to proof-of-stake should greatly help in this regard because it gives network participants more incentive to hold ether. This will solve the ICO cashout problem that plagued the platform last year. As the quality of token offerings improve, we are also less likely to see cash-grab ICOs and whitepaper projects that were rampant in 2017.

Regarding “economic abstraction,” a term that describes gas payments in non-ETH assets that could render ETH useless eventually,  Vitalik Buterin says several fixes are being considered. As Hacked reported back in September when ether was hemmoraging market cap, the community is considering the ‘modified fee market’ and ‘storage maintenance fees’ proposals, which would basically make gas payments in ETH mandatory.

From a purely price perspective, Ethereum remains a highly attractive investment relative to its peak. An investment in ETH is essentially an investment in the future of its development community and the likelihood that it will dominate smart contract and dapp development. Presently, Ethereum has the largest community of infrastructure developers contributing to the protocol and its repositories.

In light of the above, the long-term bullish case remains firmly intact. This is further elaborated in our recent article on Ethereum’s long-term prospects.

Disclaimer: The author owns Bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi