Ethereum Ends the Week Strong, but Not Strong Enough to Avoid a 5% Drawdown
Key Points
Ethereum's speed and transaction costs have been a pain in the side of investors for years.
An upcoming upgrade intends to at least partially solve for some of these core issues.
In the meantime, worries around market share gains or losses have some investors on the sidelines willing to wait it out.
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Ethereum (CRYPTO: ETH) tokens are on the move today, up more than 2.4% over the past 24 hours (as of 2:20 p.m. ET), as the broader cryptocurrency market recovers.
However, on a one week-basis (from 4 p.m. last Friday), this token is actually down 5%. That shouldn't be a surprise to most investors, considering the overall market capitalization of the entire sector dropped 6.2% over the same time frame.
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Now, one could look at those numbers and surmise that Ethereum has actually been an outperformer over the past week, an argument I'd hold is likely true. But let's dive into this weekly volatility, and see what investors are making about Ethereum's long-term growth prospects, judging by this price action right now.
Fusaka upgrade not enough to stoke investor concerns
Image source: Getty Images.
One of the more intriguing theses I've seen float around over the past week depicts a world in which Ethereum may give up market share to other blockchains. This thesis is based on the idea that other blockchains are simply faster and more efficient.
It's really that simple.
Ethereum's long transaction times, and at times high gas fees and transaction costs, have led to market share gains among up-and-coming proof-of-stake platforms out there. Ethereum has sought to fix this trend by implementing its latest upgrade, named Fusaka, which will allow for more compressed data to be stored on Ethereum blocks, improving transaction speed and costs over time.
Of course, we'll have to see if this upgrade provides the all-encompassing fix investors are hoping for, and if the sort of real-world asset tokenization and other projects that could come as a result of this upgrade flourish.
But in the midst of uncertainty, investors appear to be selling first and asking questions later. My take is that if sentiment improves, these trends could reverse (potentially in a violent way), but time will be the judge.
For now, Ethereum's weekly volatility is something I think investors ought to pay attention to. I'm waiting for a breakout, but I'm also thinking I may need to wait a bit longer.
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Chris MacDonald has positions in Ethereum. The Motley Fool has positions in and recommends Ethereum. The Motley Fool has a disclosure policy.
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