Ethereum (ETH) is up 3% on Tuesday as anticipation grows for a 50-basis-point interest rate cut by the US Federal Reserve (Fed). Meanwhile, Bitwise's weekly memo noted that Ethereum still provides several opportunities and looks like a contrarian bet.
Ethereum rallied alongside most crypto assets in the wider cryptocurrency market in anticipation of a 50-basis-point rate cut by the Fed.
However, most crypto investors have been critical of the top altcoin in the past months following its weak performance compared to Bitcoin and Solana. Ethereum's price has been relatively flat since the beginning of the year, while Bitcoin and Solana have risen by an average of 38% and 31%, respectively.
In a recent memo, Bitwise Chief Investment Officer (CIO) Matt Hougan discussed Ethereum's recent underperformance and his price predictions for the coming months.
Hougan noted that some of the reasons investors are bearish on ETH include the SEC's worry about whether staked ETH is a security, unclear regulatory status of protocols in the DeFi ecosystem, competition from newer chains like Solana, declining revenue/fees on its Layer 1, and underwhelming performance of Ethereum ETFs.
While these are genuine reasons to be concerned, Hougan highlighted that Ethereum still leads the crypto market in several key metrics.
According to Hougan, Ethereum hosts over 50% of the total stablecoin supply, 60% of DeFi total value locked (TVL), the breakthrough prediction market Polymarket, the most active users, and the most active developer ecosystem. Large traditional companies like BlackRock and Nike have also chosen Ethereum to launch their blockchain products.
"It's [Ethereum] like the Microsoft of blockchains. Everyone wants to talk about Google and Slack and Zoom, and with good reason: Each of them has brought game-changing technology to the market. But Microsoft is still larger than all of them put together," said Hougan. As a result of these reasons, he noted that Ethereum still presents a good upside opportunity.
"I suspect the market may reevaluate Ethereum as we get closer to the November elections and any regulatory clarity that emerges. For now, it looks like a potential contrarian bet through the end of the year," Hougan said.
Meanwhile, Ethereum ETFs posted a net outflow of $9.4 million on Monday following the exodus of $13.8 million and $2.1 million in Grayscale's ETHE and Bitwise's ETHW, respectively. On the other hand, BlackRock's ETHA and Grayscale Mini ETH Trust raked in inflows of $4.2 million and $2.3 million, respectively.
Ethereum is trading above $2,360 on Tuesday, up 3% on the day. In the past 24 hours, ETH has seen $26.4 million in liquidations, with long and short liquidations accounting for $13.99 million and $12.41 million, respectively.
On the 4-hour chart, Ethereum is attempting to break above a descending trendline and the $2,395 key resistance of a rectangle. If ETH completes this move, it could begin another extended move within the $2,395 to $2,817 price range, where it mostly traded in the past month.
ETH/USDT 4-hour chart
A sustained high volume move above the $2,395 resistance will flip it into a support and see it attempt a 17% move toward the $2,817 level. However, if ETH sees a rejection around this level, it could decline toward the support level around $2,200.
The 50-day, 100-day and 200-day Simple Moving Averages (SMAs) stand as potential resistance on the way up.
The Relative Strength Index (RSI) and Stochastic Oscillator (Stoch) are above their neutral levels of 50, indicating strong buying pressure on the 4-hour chart.
A daily candlestick close below the $2,111 level will invalidate the thesis.
In the short term, ETH could decline to $2,288 to liquidate positions worth $40.34 million.
Ethereum is a decentralized open-source blockchain with smart contracts functionality. Serving as the basal network for the Ether (ETH) cryptocurrency, it is the second largest crypto and largest altcoin by market capitalization. The Ethereum network is tailored for scalability, programmability, security, and decentralization, attributes that make it popular among developers.
Ethereum uses decentralized blockchain technology, where developers can build and deploy applications that are independent of the central authority. To make this easier, the network has a programming language in place, which helps users create self-executing smart contracts. A smart contract is basically a code that can be verified and allows inter-user transactions.
Staking is a process where investors grow their portfolios by locking their assets for a specified duration instead of selling them. It is used by most blockchains, especially the ones that employ Proof-of-Stake (PoS) mechanism, with users earning rewards as an incentive for committing their tokens. For most long-term cryptocurrency holders, staking is a strategy to make passive income from your assets, putting them to work in exchange for reward generation.
Ethereum transitioned from a Proof-of-Work (PoW) to a Proof-of-Stake (PoS) mechanism in an event christened “The Merge.” The transformation came as the network wanted to achieve more security, cut down on energy consumption by 99.95%, and execute new scaling solutions with a possible threshold of 100,000 transactions per second. With PoS, there are less entry barriers for miners considering the reduced energy demands.