Bitcoin isn’t the only cryptocurrency to catch the eye of investors in 2020. The second-largest digital asset by market cap is Ethereum. One of the reasons is the imminent launch of ETH 2.0 with a new consensus algorithm. Also, the growth in popularity of the second cryptocurrency was influenced by the success of many DeFi projects built on its blockchain.
Note, that Ethereum, according to the creators’ forecasts, should switch to the new Proof-of-Stake algorithm by the end of 2020. Today, this is the main growth driver for ETH/USD , the quotes of which feel insecure due to increased network fees.
This is quite reasonable, as investors and network members are concerned about the current situation. For example, on September 21, the UniLogin platform closed due to high fees on the ETH network. A similar issue will ultimately await many platforms, so the Ethereum update could give a new breath to the project.
Thus, if there is any growth, it will be limited by the $ 600 level. However, the drop is most likely due to the huge online fees. It is likely that when the demand and excitement around the new algorithm and DeFi subside, there will be no one to support the rate, and the price may collapse by 40% to the level of $ 200 per coin. Therefore, it is highly possible that the end of 2020 Ethereum will mark in the red zone.
But while mining is making big money, many miners are focused on Ethereum mining. The network hash rate has grown by 30%. However, many miners immediately fix profit and convert tokens to fiat.
At the same time, Ethereum has shown attractive growth dynamics. The asset has established itself as a reliable lot in an investment portfolio and a profitable currency for speculative trading both in short-term transactions and in the long term.
However, the upcoming PoS could confuse some investors as the restructuring reduces the accuracy of growth forecasts and introduces many amendments.
The Ethereum 2.0 transition is not as easy as it might seem to ordinary people. The transition will be carried out in 4 consecutive phases. The process provides for the registration of new validators at the launch of PoS, division into 64 synchronized chains, the integration of the ETH PoW blockchain with the new PoS blockchain, and the subsequent opening of accounts on ETH 2.0.
Each of the points of the planned routing has its own performance requirements and risks, due to which the transition can be postponed indefinitely. The risks are reflected by curbing the growth dynamics of the cryptocurrency rate.
If the optimization is carried out as planned, the process will contribute to the release from centralization and will have a beneficial effect on the operation of the network, significantly reduce energy consumption and transaction processing time. In addition, energy-saving will contribute to the implementation of environmental programs, which will attract additional investment. The consequence will be an increase in the corridor of ongoing transactions and an increase in the value of ETH by at least 30% by the end of 2020.
As for DeFi, the rapid development of apps, exchanges, and services that allow users to work with cryptocurrency without trusting it for storage can bring new investments. This sector has already grown to $ 8 billion and continues to grow. Most of the DeFi protocols are deployed on the ETH platform, therefore, the popularization of this direction will affect the price increase.
The launch of Ethereum 2.0 phase zero and the expectation of a full blockchain update in 2021. When this happens, users will have a staking option, thanks to which they can increase the amount of ETH for storing cryptocurrency in their wallets. Therefore, there is already a greater demand for altcoin from retail and institutional investors. This, among other things, is evidenced by the achievement of record levels of trading volumes for futures on the ETH with physical delivery.