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There has always been talk about ‘flippening’ in crypto circles. This is a hypothetical moment when the market capitalisation of Ethereum edges past that of Bitcoin. But it is not just talk when ‘flippening’ was suggested by Goldman Sachs. In a note to its clients in July 2021, the investment bank touted Ethereum as the coin that will eventually win the cryptocurrency race. Goldman Sachs highlighted the several advantages Ethereum has over Bitcoin, such as speed and security, as well as the blockchain network that enables decentralised finance (DeFi) and smart contracts.
At the time Goldman sent the note, the market capitalisation of Bitcoin was about $600 billion, while that of Ethereum was around $250 billion (less than half that of Bitcoin). Ethereum has been a solid number two for many years, but it is easy to see why Goldman Sachs backs it for the crown. Most dApps (decentralised applications) run on the Ethereum blockchain platform, but the last few months have seen its potential soar even further. DeFi has offered an alternative to the current centralised financial system, creating a global, open, and transparent solution that will allow anyone to borrow, save, invest, trade, or perform any financial activity within the blockchain. DeFi is already a multi-billion industry, and most projects are hosted on the Ethereum network. While DeFi is gathering pace, NFTs have literally exploded. NFTs are tokens that digitise all manner of assets on the blockchain. There is already an NFT that has been sold for $69 million, and the industry is just getting started.
Ethereum has all the credentials to make ‘flippening’ a self-fulfilling prophecy. And the Goldman Sachs thumbs-up can only affirm the belief of investors and encourage Ethereum trading.
What is Ethereum (ETH)
Ethereum was created and introduced to the world in 2013 by Vitalik Buterin, and went live in July 2015. Developers were looking for a way to differentiate from the Bitcoin currency, and make a product and accompanying digital currency that would stand-alone and work on fixing the imperfections in Bitcoin. They developed a new approach, with a new platform and a more common script language. Their software allows customers to run any programme, which makes the Ethereum blockchain process and applications much more efficient than ever before. With Ethereum, developers can build a new type of software called a “decentralised application”. This coding technology is not controlled by any individual or central system.
What are the advantages of Trading Ethereum with AvaTrade?
When you trade ETH with AvaTrade you can find advantages that you wouldn’t necessarily find when working with an exchange. These include:
- Short selling
With most investment types like stocks you would BUY low and Sell high for a profit. With short selling you are shorting the asset, which means SELL high and BUY low. This allows a trader to trade in bearish markets (falling) too. In other words, short selling is driven by the belief that a price index will decline, allowing it to be bought back at the lower price to profit.
- Lower capital requirement
Rather than buying the ETH itself, you are speculating on its price movement. This means that you do not need such a large sum to gain exposure to the asset. In fact, with AvaTrade you can trade ETH and other cryptocurrencies with just $100 to start.
- Leveraged trading
This is a major advantage commonly used by professional traders. It allows you to open a much larger position than your capital would dictate. Leverage can magnify your potential profits, and at the same time, can magnify your losses.
- Auto trading
This refers to using software called Expert Advisors that creates automatic orders and submits them to a market exchange. These systems can perform repetitive tasks at high speed. It can also come in forms of social trading via AvaSocial and copying the positions of experienced traders with a proven success record, like Zulutrade does.
Most exchanges are not regulated, which means no protection for you as a user. AvaTrade gives you the knowledge that you are working with a transparent, secure brokerage firm when you trade Cryptos and other CFDs.
Trading Ethereum with AvaTrade doesn’t require a wallet, since the trades are performed though our SSL secured online trading platform, this is a big advantage in avoiding potential hackers and theft. From the same platform you can trade Forex pairs and other assets as well.
Why Trade Crypto CFDs With AvaTrade?
- Uncompromised Safety
With seven regulatory authorities and segregated accounts, your money is protected at all times.
- Many Cryptos to Choose From
Trade on the wide variety of individual cryptos or the top crypto index available on our trading platforms.
- Crypto Never Goes to Sleep
AvaTrade is one of the few brokers offering around-the-clock service and support in 15 languages.
- Generous Leverage
Increase your initial capital with generous leverage and get far more exposure to trade using your account balance. Up to 2:1 (for EU residents) 25:1 (for non-EU residents).
- Limit Your Risk
You can preset profit and loss levels by using stop losses or take profit limits when you trade. Determine the maximum amount you are prepared to risk when speculating on the price, or set a price at which you want to take profits. Future orders like Buy Stops and Buy Limits are also available.
- Trade Cryptos Against Fiat Currencies
Unlike many exchanges out there, who are restricting their clients to trade only Crypto to Crypto, our clients can trade Cryptos against Fiat currencies (USD, EUR, JPY etc.), as well.
What are the Advantages of Ethereum Technology?
- The app can never be turned off
- Applications are protected against fraud and hackers due to the secured cryptography
- It cannot be censored, since the apps are based on the principle of a group decision- making process
- A third party cannot make changes to any of the data
- Ethereum has more applications than Bitcoin does
Mist browser is the interface and digital wallet for Ethereum users. With it people can store, trade, and manage their contracts. Mist and MetaMask (another browser) help make blockchain-based applications easily accessible. Ethereum is moving forward with its user-friendly platform, which enables people to make use of the blockchain technology.
Ethereum Price and Market Factors
Ethereum and ETH is considered much more than just a digital asset. Its value lies in the powerful blockchain programming language called Solidity. Its goal is to become something totally different from all other coins. With its increased application, there is a rise in demand by developers for “Ether”. The price of Ethereum has soared and has been reaching all-time highs. Bitcoin has also been surging, and when that happens it does boost investors desire for other cryptocurrencies where gains can be acquired. Since Ethereum and Bitcoin are not competing, both can benefit when one rises. Random events can happen to affect Ether’s price rise or fall, such as the flash crash of Ethereum’s value overall, which took place in June 2017. The Ethereum news and crash happened within a very short span of time, literally seconds after a major sell off prompted other traders to liquidate their digital currency. However, in that situation within seconds computer algorithms were buying again and the price was recovering.
As you can see the volatility of the digital currencies alters prices within second. The general public and investors all had the same questions when this happened as to how the rebound could have taken place so quickly. Any strong value increase can eventually lead to a price correction. As with the cryptocurrency trading market or any market in general, the momentum can slow down at any point. A more recently introduced altcoin named EOS was named as the biggest potential competitor for Ethereum. Thirty big banks, tech giants, and other organizations including J.P. Morgan Chase, Microsoft, and Intel are uniting to build business-ready versions of the software behind Ethereum. Its ability to record and execute transactions without the need of a middleman is making this blockchain technology more popular amongst businesses. 2020 went down as the year of the coronavirus pandemic, but for investor portfolios, cryptocurrencies provided more than just a mere cure. Ethereum (ETH), the world’s second-largest cryptocurrency by market cap, as of March 2021, saw its price more than quadruple in the year due to favourable fundamentals.
In a year when the coronavirus pandemic literally halted global economic activity, it was always expected that cryptocurrencies would at least see capital inflows from investors keen to look for returns on alternative investments. In cryptocurrency trading, the focus was always on Bitcoin (BTC), the foremost and most popular coin. Bitcoin also had a positive major fundamental event going its way during the year, which was the Bitcoin halving that effectively decreased miners’ incentives, which consequently reduces the coin’s supply. Bitcoin was the cue provider in the cryptocurrency market, and Ethereum followed suit. By the end of 2020, Ethereum printed a high of $750, which represented a jump of over 450% from lows of below $130 in January 2020. But Ethereum was not just following the cue provided by Bitcoin. Instead, it was consistently growing and attracting investor demand due to its own fundamentals. By Q3 2020, data from AksjeBloggen.com showed that daily transactions in Ethereum averaged 1.1 million daily, the highest in cryptocurrencies, and actually 3.5 times more than Bitcoin trading volumes.
Investors were particularly excited by the launch of Ethereum 2.0, an upgrade of the Ethereum blockchain that would enhance its speed, efficiency, and scalability. Ethereum 2.0 will take place in 3 phases (0, 1, 2), and the first phase was completed in December 2020. The whole upgrade is set to be concluded by the end of 2021, and this should continue to provide tailwinds for the coin. Bitcoin had broken above 2017 highs in December 2020, but at $750, Ethereum was still way below its 2017 highs of circa $1440. Despite this, the coin started 2021 positively, following the cue of Bitcoin as well as receiving a boost from a fundamental tailwind. Bitcoin overcame a brief period of retracement and continued to surge higher and higher as institutional money flowed into the cryptocurrency markets. Ethereum edged higher just below its previous all-time-high but it managed to break above this price in early February 2021 ahead of the launch of Ethereum Futures on the CME (Chicago Mercantile Exchange). Ethereum was no longer under the shadow of Bitcoin and could now attract its own investors as a core crypto coin, not just a secondary one.
Going forward, Ethereum seems well supported by positive fundamentals beyond Ethereum 2.0. Its platform is still a major player in the development and launching of new decentralised applications (dApps). Ethereum has also been linked with the project COSMOS, an infrastructure that will allow interoperability and the ability to perform transactions between different blockchain platforms via the so-called Gravity Bridge. Technically, at the time of writing, Ethereum bulls continue to defend the $1,700 area, and this will likely be buoyed if Bitcoin stays above $50,000. A major dip in Bitcoin will likely inspire bears to attempt to drive the coin below $1,500. However, bulls should be confident of taking out the $2,000 price target soon, according to analysts at Wallet Investor. This is a short-term target, though with other lofty targets suggesting that a $10,000 price is realistic in the long term. This will coincide with the coin attaining a market capitalisation of above $1 trillion, compared to the current $200 billion (as of March 2021).
But not everyone is overly bullish, with other analysts pointing out that Ethereum will struggle to sustain its current momentum. Trading Beasts, for instance, have a Q1 2021 target price of around $,1630 and circa $1,100 by the end of the year. Still, that sets a floor that is above $1,000 for the Ether coin, which still remains favourable for Ethereum’s future. A lot of people in the industry are complaining about Ethereum’s high gas fees, which is the cost the user must pay miners, which is getting increasingly higher. This is something Ethereum will need to address, before they can continue higher.
Ethereum Trading Conditions at AvaTrade
- Competitive Spreads
- Minimum Trade Size 1
- Up to 2:1 (for EU residents) 25:1 (for non-EU residents).
- Trading Hours 24/7
- MT4 Symbol ETHUSD
Ethereum Trading FAQ
- What are some of the challenges faced by the Ethereum network?
Ethereum is second only to Bitcoin as the most capitalised, and in-demand digital currency. However, challenges remain. Between 2% – 5% of Ethereum transactions on decentralised exchanges fail, due to insufficient gas prices, or slippage. Other issues include the network’s inability to scale effectively to meet demand. The scalability challenge is largely due to the innate properties of ETH mining. With 7-15 TPS (transactions per second) compared to Visa at 45,000 TPS, it’s clear that much work needs to be done. Possible solutions include state channel, sharpening, and plasma, but in-depth study of these solutions is needed.
- How will EIP-1559 impact demand for Ethereum?
Ethereum’s upgrade to Ethereum 2.0, a.k.a. EIP-1559 represents an overhaul of the transaction-fee system for the digital currency. The fee is no longer paid to Ethereum miners, but to the network itself. The new system may result in a decreased supply of Ethereum. Vitalik Buterin co-founder of Ethereum joked that if there is decreasing supply, does that make Ethereum ultrasound money? The new network upgrade recently approved by developers could decrease Ethereum supply and prop up its price. With demand at high levels, and supply at lower levels, prices may rise. EIP-1559 (Ethereum Improvement Proposal 1559) was packaged with the London hard fork.
- Should I use leverage with Ethereum trading?
At current price levels, Ethereum is largely out of reach for many retail traders. As a South African trader of Ethereum CFDs, costs can quickly spiral. Fortunately, leveraged trades of up to 20:1 are possible for certain classifications of traders. Provided you conduct the requisite research, stick to a trading strategy, and carefully manage your investment funds, you can benefit from leverage. The volatility of crypto markets should always be borne in mind when trading derivatives. Since the CFD price is derived from the price of Ethereum, leverage can amplify your gains, but it can also multiply your losses.
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