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The impact of Ethereum 2.0 on the price of ETH
The impact of Ethereum 2.0 on the price of ETH
Ethereum

The impact of Ethereum 2.0 on the price of ETH

By Marco Cavicchioli - 5 Nov 2020

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What could be the impact on the price of ETH resulting from the release of Ethereum 2.0? 

After releasing the ETH 2.0 deposit contract, the procedure leading to the final launch of the second version of the protocol seems to be within reach, hence this is a question that many investors are asking themselves. 

First of all, it must be said that the news of the release of the deposit contract seems to have had an immediate positive impact on the price of ETH.

Yesterday it was worth $383, but within half an hour it had already risen to $397, and then further increased to over $400, with a gain of over 6% in about an hour and a half. 

Moreover, since the end of October, the price had not risen above $400. 

In addition, this increase yesterday also made the dominance of ETH rise, revealing that it was not related to the simultaneous increase in the value of BTC. 

Before the spike that brought the price back above $400, the dominance of ETH was 10.9%, while after it had risen to 11.3%. 

However, it should be noted that, with today’s increase in the price of BTC, the dominance of ETH has returned to 11%, while for example a month ago it was 11.7%, and on September 2nd it reached a temporary peak of 13.7%. 

Ethereum 2.0 will increase the price of ETH

This scenario seems to suggest that the single steps forward in the evolution of the Ethereum 2.0 project are able to influence the price of ETH, but only for short moments, and in a non-substantial way, while instead other phenomena, such as the DeFi boom, are able to have a more consistent and more lasting impact over time, although always of relatively short duration. 

However, a recent research by Binance reveals that a more complex and structured argument should be made in particular for the derivatives market. 

According to this research, not only phenomena such as the DeFi boom can be significant variables as far as the bullish sentiment on ETH is concerned, but the upgrade to Ethereum 2.0 could also be significant in the long run, helping to build a “fundamentally sound” narrative on this project. 

This could lead to an increase in investors who will gain exposure to ETH using derivative products during 2020. 

In addition, with the upcoming transition to Proof-of-Stake, many investors will have an incentive to keep their ETH locked to earn staking rewards, which will presumably reduce the supply of tokens on the market. As demand for ETH continues to grow, this could lead to a price increase. 

Yet the timeframe is still lacking. In other words, this is a phenomenon that should occur in the medium term, and not in the short term, and the release dates of the new features are not yet known.

 

Marco Cavicchioli
Marco Cavicchioli

Class 1975, Marco teaches web-technologies and is an online writer specializing in cryptocurrencies. He founded ilBitcoin.news, and his YouTube channel has more than 25 thousand subscribers.

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