ETH breaks $3,000 for the first time!
Ethereum just broke a critical psychological barrier. The world’s second largest cryptocurrency by market cap has seen positive gains for seven consecutive months. It’s among one of many altcoins making moves as of late.
Next to Bitcoin, I discuss ETH the most. The altcoins I currently hold include Ethereum, Cardano, Ravencoin, and Basic Attention Token. I started investing in ETH in 2016 when it was just $12 and even built an Ethereum mining rig last year. I mine Ethereum. The price of ETH, however, is rising precisely because mining is being phased out as we speak.
The industry is bullish on Ethereum.
I’m cautiously bullish along with everyone else. As I’ve said before though, my goal is to increase the percentage of my Bitcoin holdings in relation to my overall portfolio. The recent spike in Ethereum, along with the fact that I’m still mining ETH, is making it harder to minimize its impact on my crypto portfolio. I may need to start rebalancing if the ETH pump continues.
More Network Activity
Activity is increasing on the Ethereum network.
Much of rise in network activity is thanks to positive news surrounding Ethereum. The European Investment Bank is issuing digital bonds on Ethereum, there are Ethereum ETFs in Canada, and the ETH 2.0 transition to a proof-of-stake consensus model is becoming a reality. Just the other day, Coinbase notified me that I can now stake ETH on their platform to earn a percentage yield on any holdings.
To be clear, I’m not currently staking any ETH. That doesn’t mean I won’t in the future though. I’m mining ETH directly to BlockFi and plan on mining to Coinbase at some point so I can easily convert to BTC without fees.
If the bullish ETH momentum appears sustainable, I may consider holding a larger amount of the ETH that I mine until the market signals I should do otherwise. In that case, I would likely participate in staking. The Coinbase staking news is just one of many signs that ETH 2.0 is coming. There are major upgrades coming to the Ethereum network and miners will likely start feeling their effects by late Q3.
Quick pause—what is staking?
Staking is holding your coins on the network. Proof-of-stake means that coins held on the network validate transactions. The more coins an owner has (and sometimes the older the coins are), the more that owner is rewarded. This is in contrast to proof-of-work which rewards miners with coins for validating transactions. Miners, like myself, do this by running software on custom built hardware.
ETH Mining To End
Miners won’t be around forever.
Our time is limited. That’s what I mean by feeling the effects in Q3/Q4. It’s inevitable that mining profitability around Ethereum will decrease in the coming months. The more staking is introduced across major platforms, the more Ethereum advances their overall roadmap around ETH 2.0.
All of that means fewer profits for Ethereum miners… I’ll be doing a delicate dance around watching the price of ETH, watching the profitability of mining (i.e. how much longer I mine ETH over other coins), and deciding to earn yield on my holdings versus converting any newly mined ETH directly to BTC and putting it away in cold storage. It’s going to be an interesting year.
Miners needs to be ready to adapt their strategy at any moment. We will have to pivot at some point in the very near future. I’ll keep you updated on what I do. It’s going to be a bittersweet year for miners. While I’m of course enjoying the rise in price, I’m disappointed to see miners being phased out for proof-of-stake. I have my reasons why I believe proof-of-work (also what Bitcoin uses) is superior to proof-of-stake, but I need another newsletter (or five) for that…
Bitcoin Price Test
Bitcoin eyes $60,000 again.
Last week, I mentioned the battle Bitcoin was fighting against $56,000. It appears that Bitcoin has defeated $56k yet again. Currently, the world’s largest cryptocurrency by market cap is eyeing the $60,000 price point and could be poised to retest the all time high close to $64,000 if it can remain on track.
I love seeing strong weekend price action. It makes me eager to wake up Monday and see how the world reacts. Because Bitcoin is universal and open source, it’s not tied to any centralized entity anywhere. It doesn’t operate like the traditional markets. There are no after hours trading periods. It’s always on.
Bitcoin even sees moves in relation to when Asian markets wake up versus American markets and everything in between. It’s always happening. BUT, Bitcoin is also largely bolstered by investors and platforms more closely tied to those traditional markets so there’s no telling what any Monday can bring.
I’m hesitant to say I’m anything but bullish, but I think the next few months are going to be huge for Bitcoin and the overall crypto market. That means that the Ethereum momentum mentioned above is likely to continue too. Remember, as Bitcoin moves, so does the market. Bitcoin is still roughly halfway through the current market cycle. That’s good for Ethereum and others.
Ethereum can successfully hit ETH 2.0 checkpoints, increase activity on the network, and still see a price decline if Bitcoin corrects though. Despite the recent talk about ETH breaking away from BTC and moving independently, I’d say the jury is still out. Ethereum is yet to be tested on its own. This new all time high price action could very well be Ethereum’s first major test without Bitcoin.
We’re in a bull market.
Great things are happening on a lot of projects, but we’ve seen great projects rise and fall (and even disappear) in the past. Just look at 2017-2018. Plenty of altcoins didn’t survive the bear market afterward…
Everyone looks like a genius in a bull market. Dogecoin, an altcoin that’s had no meaningful development since its inception and that has an unlimited supply of coins pumps in a bull market. But, so do “quality” projects like Ethereum. It’s hard to see the forest for the trees right now. The point is that everything pumps in a bull market. It is the bear market where actual network development occurs and we see what projects will remain alongside Bitcoin.
Key Price Levels
Where does Bitcoin go next?
I mentioned it above but $60,000 is the next upward price level to watch for Bitcoin. We’re seeing significant resistance there so Bitcoin is primed for another big test this week. Buy/sell demand on crypto exchanges is setting BTC up for a challenge but that could change at any point.
Fresh inflows of cash or stablecoins onto exchanges and what they do next could signal which direction we go. As long as BTC trends upward (or even sideways), it’ll consolidate and possibly build FOMO sentiment as it creeps back toward the all time high of $65,000.
Consolidation in the mid-high $50,000s is critical right now. Bitcoin isn’t showing strong support anywhere close to current levels. As of writing, BTC is closing on $59,000 and the closest lower support level is $52,000.
A successful push to $65,000 opens up Bitcoin to several price calls we’ve seen between $72,000-77,000. If that happens, it’s off to the races—possibly toward those higher calls we’ve seen such as $115,000 from Pantera Capital.
The ETH Factor
We can’t ignore the impact of ETH on BTC this week.
With the new ETH all time high, it’s important to watch what traders do—as always, especially those whale and newcomer segments. Odds are that newer retail investors will jump on the Ethereum rally but they could flip to Bitcoin if it takes down $60,000, not wanting to miss another BTC all time high.
I’ve seen ETH price predictions of $3,500 by week’s end. I’m also starting to see talk of $10,000 ETH by the end of 2021... All of this is based on very recent price action though. There’s so much uncertainty around the market.
ETH has a lot to live up to. The network must continue to see steady transaction volume (despite high fees), increased staking, AND it has to ultimately reduce transaction fees as ETH 2.0 rolls out. If Ethereum can stay on track and hit its checkpoints, it could be a bullish few months for it and other altcoins—but of course, Bitcoin price action can always change everything.
Brace yourself for the week ahead.
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