ETH price appears to be entering a new market cycle as DeFi trend continues gaining major traction
ETH price and the cryptocurrency market have been caught up in the boom of intense sideways trading for days and weeks. At press time, ETH is trading at $ 228, a slight decrease, in sync with Bitcoin’s price action.
The reason why analysts believe that ETH price is entering a new market cycle
This period of consolidation provided an insight into ETH’s medium-term outlook, and some analysts believed that the possibility of ETH seeing technical weakness was very high, especially when it continues to trade sideways.
However, the current weakness of ETH is not a symbol of its underlying strength. According to Su Zhu – the CEO and CIO of Three Arrows Capital – the difference between the price of Ethereum and its utility and usage seems to indicate that it has entered a new market cycle.
And of which, it is impossible not to mention that the utility for Ethereum is a boom in the popularity of decentralized finance (DeFi). This trend has been gaining momentum throughout 2019 and early 2020 but lost this upward trajectory during the mid-March period seen by the cryptocurrency market.
However, DeFi’s growth has seen a substantial recovery in the months since, with the total locked-in value of mortgaged loans reaching all-time highs earlier this week. One of the best examples of DeFi’s current popularity can be seen while heading towards the recent launch of the Compound. The token associated with the platform – COMP – has seen a parabolic price rise, but many investors are speculating as to why this has haven’t created an upwards tailwind for ETH.
Not long ago, Compound officially usurped the throne of MakerDAO and became the decentralized financial protocol with the most significant amount of locked assets, according to DeFi Pulse. The value of locked assets in the Compound protocol is at more than $ 595 million. With this figure, Compound has surpassed MakerDao on DeFi Pulse’s chart, which has about $ 442 million locked.
DeFi Compound has just distributed COMP management tokens on June 15 to the borrowers and lenders on the platform. After being distributed, COMP started trading on DEX Uniswap at about $ 30.
Compare the total value of locked assets in Compound and MakerDAO | Source: TheBlock
But, immediately, COMP has become a new phenomenon in the cryptocurrency community. COMP price has risen sharply and reached the highest level at approximately $ 381. At the time of posting, COMP is being traded at $ 314.
Returning to ETH, to answer the question of how ETH can accumulate value, proving it is entering a new market cycle, Zhu explained as follows:
$ETH 2017: everyone was long but wasn’t sure why it was valuable
ETH 2020: even insiders aren’t sure how it accrues value, while usage is through ATHs
this is what it means to be in a market cycle https://t.co/jVXqLbfD8e
— Su Zhu (@zhusu) June 20, 2020
Despite the incredible growth in certain aspects of the Ethereum ecosystem, renowned venture capitalist Chris Burniske recently explained that its chances of a sharp decline are increasing as it continues to deliver. Translate sideways.
“The longer BTC & ETH fade here, the more likely we take another leg down to test key supports, despite the strong fundamentals of both. I would see this as more macro-jitters driven than specific to crypto’s future.”
Ethereum’s sideways trading over the past few weeks may soon draw to a close, as its ongoing break below a key support level will likely lead it down to a critical support level. The reaction to this level could play a heavy role in determining which direction it trends throughout the second half of the year…
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