Ethereum is the second cryptocurrency by market cap, which price follows Bitcoin exchange rate. But if BTC was able to rise to $ 14,000 after crypto winter, Ethereum rate did not even reach $ 400. What is ETH missing to make the price rise?
The decentralized finance market began to emerge in the fall of 2017. But that time everyone had no funds for it because Bitcoin flew to the moon. At the same time, altcoins were growing at an incredible pace, and ICO investors made 10x or 100x profit.
The discussion about decentralized finance towards the end of 2019 only. And when in mid-February 2020, the total value of funds blocked in DeFi apps exceeded a billion dollars, someone began to call the technology the future of the cryptocurrency industry.
According to DeFiPulse, there are 25 major services that account for $ 745 million. The major is the Maker project, which accounts for 49% of all funds.
Using these services, users can deposit cryptocurrency, get loans, trade, bets on various events, and more. In fact, decentralized finance is a continuation of Bitcoin idea, which was supposed to be an alternative payment system in which there would be no banks.
And DeFi services went further and offer the same services as banks, but in the crypto space and with the condition that the user retains full control over their funds. It is not surprising that even Vitalik Buterin believes in their success.
But on March 12, along with the cryptocurrency market crash, there was a halving of funds in DeFi apps, which was accompanied by crashes and liquidations. And now a class action lawsuit has been filed against the leading Maker service, demanding compensation for $ 28 million. This clearly will not benefit the market, because it undermines confidence in it, but it’s real to go through these problems.
Also, do not forget about regulation. In the United States, there was already a precedent when a decentralized exchange was accused of operating without a license and the chief developer was put on trial as its head.
But there are very significant factors, such as zero or negative rates on bank deposits in the leading countries of the world. Not everyone is ready to actively manage their money, they are much more pleasant to receive passive income and deposits were the most popular way before.
Now that they have virtually disappeared, people will look for an alternative, and if interest rate in cryptocurrencies continues to be paid regularly, new users with their money will certainly come to the industry.
Let’s look at decentralized apps:
If you rank projects by the number of active users, only one app on the Ethereum blockchain is included. While the ETH still has the largest army of fans and developers, EOS, TRON, and other platforms are winning the battle for the decentralized application market due to faster and cheaper transactions.
It has already happened so that for ordinary users, the main thing is the ease of use, and all sorts of decentralization, reliability, and other right words go far into the background. It can be assumed that after the launch of Ethereum 2.0, the brainchild of Vitalik Buterin will again become competitive.
Regarding the decentralized finance market, in our understanding, everything is very bad there now, because, in fact, it is a sandbox for bored crypto investors who, in anticipation of the to the moon, decide to periodically spend some coins on obscure purchases or lose them in a crypto casino.
And for those who are not in the crypto, this market is not interesting at all, because traditional games are many times better. Indeed, to access the service, the user must own a certain cryptocurrency, a crypto wallet, figure out how it works. And why does an ordinary person need it?
The long-awaited Ethereum 2.0 is getting closer, but still nothing. Last year, there were rumors that the developers will launch the so-called zero phase on January 3, 2020. But all this remained rumored; now there is talk that the launch is scheduled for July 30.
It is well known that the Ethereum 2.0 specification is ready, but some vulnerabilities were identified during the audit that the project team should fix. An audit was conducted to find problems at the documentation stage, and not after the main network was launched.
Also, Vitalik Buterin and other leading developers have repeatedly noted that despite the high readiness of the project, they will not start the zero phase until they are thoroughly checked in the test network using all the main clients.
Nevertheless, we hope that this event will happen this year. However, the developers will definitely not be in a hurry, because as this study shows, Ethereum caught up with Bitcoin in terms of the value of the assets transferred:
Value transfer on Ethereum just reached parity with Bitcoin.
This is a story of the explosion of stablecoins in Q1 2020.
— Ryan Watkins (@RyanWatkins_) April 15, 2020
The result is caused by a large increase in stablecoin transactions in the ETH blockchain, and it is unlikely that Buterin and the company will dare to abandon these financial flows if only to quickly update the platform.
Besides, news about Ethereum 2.0 has almost no effect on the price of the cryptocurrency. Such indifference of crypto investors will likely be until they are told it is time to urgently buy to make money on staking tomorrow – then there will be a stir.
If we look for reasons for the growth of Ethereum price, then in the first place we will put a possible increase in demand for the decentralized finance market. Then comes the launch of Ethereum 2.0, but it is the launch of the updated platform and not the news that they have taken another step towards meeting a brighter future. And in the last place we define decentralized applications, let them be, although there is very little hope for them.
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