Cryptocurrencies have had a difficult start into the new year. After hitting a record high in November, the price of the second largest asset, ethereum (ETH), fell more than 35% from its all-time high. However, experts suggest that this may be a good time to "hole buy".
- Bitcoin tested the level of 3 thousand. hole. for the first time in several months. However, the support was not broken
- For many investors and analysts ETH / USD is in a good place to "buy lows" at more attractive prices
Ethereum fell temporarily below 3,000. hole. Is this a "price floor" for ETH / USD?
The recent drops in ethereum are not just a temporary crash. After the Federal Reserve (Fed) warned that it might soon pull back stimulus measures introduced during the pandemic to fight rising inflation, the entire cryptocurrency market saw a massive sell-off (as did other riskier assets that have been booming in recent quarters).
Cryptocurrency prices are also losing ground as more countries are struggling to mine Bitcoin (BTC) or trying to regulate industries. In addition, unrest in Kazakhstan - a country that is one of the main cryptocurrency mines on the map - has been linked by experts to greater volatility in the cryptocurrency market.
Even so, ethereum declines can be a buying opportunity at times, in line with the "sell high and buy cheap" principle. For some, such an opportunity arose at this very moment.
The president of the on-chain analytical company CryptoQuant, Ki Young Ju, claimed in August last year that ETH would not fall below 3,000. dollars, and the level will be the "price floor" for the popular cryptocurrency. The dynamic response of the demand after an attempt to break this level six months later confirms its finding.
The fundamental foundations of ethereum remain very strong
Every time the price of a cryptocurrency starts to decline, it is important to consider why. In some cases, this is because the cryptocurrency itself is not a strong investment, and there is some kind of downside that worries investors. In other cases, however, it is the result of external forces, and in the digital asset market it is also the result of excessive speculation.
Right now, ethereum is basically the same cryptocurrency it was two months ago when it hit record levels. Its fundamentals have not changed, and the fall in prices is most likely due to the actions of the Federal Reserve and the general uncertainty surrounding both the economy and the cryptocurrency market.
This does not mean that ethereum is guaranteed to bounce off current support. But since the fall in price is primarily due to investor uncertainty and a shift in the Fed's monetary policy stance, making the dollar rise rather than the bottom line, it is more likely that it will eventually catch up.
Ethereum as a long-term investment?
Whether you are buying stocks or cryptocurrencies, it's important to keep a long-term perspective.
Nobody knows how long the current downturn will last. However, there is a good chance that the price of ETH will eventually return to normal - you just have to wait for it. Suffice it to recall that in April last year, ethereum stopped at $ 4,400 in May and then revised 60% in just 2 weeks, returning well below the 2,000 mark. hole.
But did this stop the depreciation and mean the end of the market? Quite the opposite. After this strong correction, the rate increased by 135% and then was revised by 35% in September. What happened next? Appreciation by over 80% and a test of historical highs. Although the current correction is longer, one in the cyclical markets sooner or later reverses:
Despite this volatility, ethereum still has updates in the pipeline that could make it an even better investment. The transition of the network to the Ethereum 2.0 protocol is to make the blockchain much faster and more energy-efficient, and the transaction fees will be reduced. This update should be completed later this year, which will undeniably strengthen ETH.
Volatility is the bread and butter of cryptocurrencies, including ETH
While this may be worrying for some investors, the type of volatility currently observed is not unusual for the cryptocurrency market. In fact, ethereum lost almost 95% of its value over the course of 2018. For comparison, the decline of 35% currently observed seems mild.
When you buy at this point, expect to see more volatility - especially in the next few weeks and months. However, these short-term turbulences should not be too disturbing. For your peace of mind, it's a good idea to take a long-term approach and not worry about short price fluctuations.
Is ethereum the right cryptocurrency for investment?
Ethereum is one of the strongest players in the cryptocurrency space and has a bright future ahead of it - despite its short-term volatility. However, it is not an investment that is suitable for everyone.
If you are a risk averse investor, the current time to buy may not be the best. Overall, cryptocurrencies are a highly speculative investment. While ETH has many advantages, there is no guarantee that it will be successful in the long run.
Also, only invest money you can afford to lose, and don't invest anything that you might need in the next few years. Ethereum has had some tough months behind it, but is still a strong long-term investment. If you are prepared to tolerate a higher level of risk and volatility, it is worth looking at ETH at its current, relatively low levels.
I look Ethereum for the mid-long term. A deflationary coin with strong fundamentals and use cases!
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