Ethereum Battles Overcoming Challenges Amid Legal Scuffles and Technical Upgrades
Summary:
Despite a 36% increase in Ether's (ETH) value in 2023, it remains 66% below its November 2021 peak. Ethereum's protocol upgrades sparked investors' hopes, resulting in a low annual issuance rate and staking protocol withdrawals. However, the ongoing legal case between Ripple and the SEC could impact Ether's price, according to analysis. Positive development includes requests for a spot Ether exchange-traded fund and Canto's migration to Ethereum's layer-2, indicating that Ether might be ready to bounce back.
In 2023, Ether's (ETH) value saw a year-to-date climb of 36% in terms of U.S. dollars. However, this rebound appears moderate when you consider that ETH is still trading 66% lower than its peak of $4,870 in November 2021. Moreover, Ether dropped to its worst levels against Bitcoin (BTC) in 14 months on September 20, falling below the key 0.06 BTC support, which has led to intrigue regarding the reasons for this downward turn in price.
Key changes in the protocol that dramatically decreased the need for issuing new coins as the network navigated to a Proof-of-Stake consensus system sparked the biggest hopes for ETH investors. In the middle of September 2022, these expectations were met, resulting in an annual issuance rate of just a quarter of a percent of the total supply. Another major concern for investors was addressed with the subsequent Shapella upgrade on April 12, offering withdrawals from the native staking protocol.
The Ethereum community celebrated these significant victories, which occurred with minor issues, fuelling confidence in the expectation that Ether's rate would exceed $2,000. The price indeed surpassed this threshold on April 14, but faith was short-lived as the price stumbled back to $1,850 only a week later.
Stunningly, Ethereum staking saw a net inflow of 3.1 million ETH in the 30 days after Shappela's upgrade, even surpassing optimistic estimates. Yet, with Ether's cost relative to BTC on a downward trend and Ethereum's developments mostly on schedule (excluding typical delays), investors are now investigating other possible catalysts to shift this trend.
One such catalyst is the ongoing legal face-off between Ripple (previously Ripple Labs) and the U.S. Securities and Exchange Commission (SEC), which could majorly influence the momentum of Ether's price. The SEC claims that XRP sales to retail investors are equivalent to a securities offering. Yet, in July, Judge Analisa Torres ruled that XRP does not usually qualify as security under SEC regulations, especially when transacted through exchanges.
Despite this and even if Ripple was victorious, it would not eliminate Ethereum's risk instantly, according to Bryan Jacoutot, who commented on Ethereum's exposure due to pre-sale of ETH targeted at institutional investors. Moreover, signals like an Ethereum address connected with the ICO era activating for the first time on September 20 and transferring 32.1 ETH to Coinbase only fed the regulatory dread.
However, Ethereum has also witnessed positive surprises. ARK Invest and 21Shares unexpected request for a spot Ether exchange-traded fund (ETF) on September 6 is one such surprise. Also, the migration of Canto, a Cosmos-native blockchain, to Ethereum's layer-2 on Sep. 18 sparked positivity. Given all these aspects, if the surge in Bitcoin's price results merely from the approval of a spot Bitcoin ETF or concerns related to inflation in the U.S., Ether is apt to follow, benefitting as well from these catalysts.
This information article does not function as legal or investment advice, but simply serves the purpose of providing general information. The author's views expressed here are personal and may not echo the views and opinions represented by Cointelegraph.
Published At
9/21/2023 2:25:00 PM
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