Ethereum hits an all-time high, but how long will the rally continue?

Ether, the cryptocurrency used on the Ethereum network, is arguably one of the biggest rivals to bitcoin, and in many ways significantly better when it comes to the underlying technology. How high will the bull market go? 

Trader
Source: Bloomberg

The ether price recently hit a new all-time high, and its market capitalisation now sits at about $42 billion, a rise of 5000% this year alone. The wider cryptocurrency market has been in a bullish trend for about 18 months, but the issue traders have now, is that no one knows where we’ll go from here. Billionaire investor Mike Novogratz reckons that we’ll be seeing $500 ether before the end of the year, and that it’ll be matched with $10,000 bitcoin, but this prediction certainly isn’t shared by everyone.

Tulip mania

Critics of blockchain technology, and the cryptocurrency rally specifically, would be the first to interject and say these sorts of percentage movements are unsustainable and a crash is imminent. ‘Tulip mania’ seems to be the go-to phrase these days, and despite there being absolutely no comparison between a revolutionary technology backed by the largest institutions around the world, and a flower, they may have a point… in the short term. Before we discuss ether, let’s look at bitcoin.

The death of bitcoin has been called time and time again. There’s even an obituary website for it which tracks prominent news outlets every time they say ‘the end is neigh’ for the digital currency. If you think a cat having nine lives is amazing you’ll be shocked to hear that bitcoin has already died 190 times. And that’s just the prominent news sites.

That’s not to say there hasn’t been some pretty serious corrections, and it’s not usual for there to be a double-digit percentage pullback. Maybe advocates and critics differ in their definition of ‘death’? Those who buy and hold cryptocurrencies, and truly believe in the technology, are familiar with these sorts of movements, while someone who is less verse in the price action would define a 70% pull back as a killer. Believe in it? Buy and hold and try and cut out the noise. Don’t believe? Rejoice in glee that your prediction of a correction was right (until the market finds more buyers that is).

Ether one up’s bitcoin

Ether, however, is different from bitcoin, and very, very different to a tulip. It feels odd that this particular sentence needs to be said at all, but it’s true – blockchain technology (and the associated price action which comes with cryptocurrencies) is slightly different to a flower. The issue comes down to how to accurately value these assets.

True, you can’t value it in the same way you would a traditional company, as there is no balance sheet, assets, or forward earnings. However, there is potential, and this is what speculators look for.

The best place to start your research into the true potential of the ethereum network is the Enterprise Ethereum Alliance. This group’s primary focus is to ‘connect Fortune 500 enterprises, startups, academics, and technology vendors with Ethereum subject matter experts. Together, [the group] will learn from and build upon the only smart contract supporting blockchain currently running in real-world production to define enterprise-grade software capable of handling the most complex, highly demanding applications at the speed of business.’ You only need to have a look at their member page on their website, to see that there are some serious companies in this space. Do Microsoft, JP Morgan, Deloitte, CME Group, and BP ring any bells?

The primary purpose of the ethereum network is that you can build on it, and you can build on it very easily. It’s what’s known as a protocol coin and is based on a widely used scripting language which gives developers a head start in coding applications. Once it’s up and running, the promise is that you will be able to process contracts quickly and cheaply, and a whole host of actions you have today (remittances, share transfer, cash transfer, etc) will be done almost instantaneously, and at a fraction of the cost.

If this is the case, then there could be a real future for ether. Furthermore, if prominent companies such as those above are looking into the space then it may indicate the ethereum blockchain, and by association ether, has a leg to stand on and warrants further research.

There’s no doubt there will be volatility ahead for the ether price, and there is bound to be a significant market correction at some point, but the long-term prospects for ethereum appear solid at this point. 

Cryptocurrency trading

You don’t need to own cryptocurrencies to trade
on them.

Learn how to go long or short on bitcoin, ether,
ripple and litecoin.

IGA, may distribute information/research produced by its respective foreign marketing partners within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

This information/research prepared by IGA or IGA Group is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. In addition to the disclaimer above, the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

See important Research Disclaimer.