Trader: Ethereum is More Vulnerable Than Bitcoin to a Major Correction
Throughout this week, some of the most widely recognized traders in the cryptocurrency community have said that Bitcoin is due for another correction before initiating a mid-term rally.
Peter Brandt, a highly experienced trader in the FX and cryptocurrency market, said in his 43 years of trading, he has not seen any asset that experienced a major trend reversal after an 80 percent correction within two weeks of stability.
In 43 years of trading I have never seen an 82% decline end and be reversed with a 2-week bottom. I do not believe this will be the first time, but with cryptos anything is possible (though not probable) pic.twitter.com/HSPTpahie3
— Peter Brandt (@PeterLBrandt) September 1, 2018
Ethereum is More Likely to Fall by Larger Margin
Alex Kruger, a prominent economist and trader, said earlier this week that Ether is more vulnerable to a correction than Bitcoin.
2/ ETH vs BTC Selling pressure
– ICO treasury holdings: $12.5M/day ETH, $1.5M/day BTC
– Exchanges: $25M/day BTC
– Miners: $6M/day ETH, $13M/day BTC
— Alex Krüger 🇦🇷 (@Crypto_Macro) August 30, 2018
If Bitcoin and the rest of the cryptocurrency market experience another correction in the mid-term to establish a strong foundation for the next rally, Kruger said that Ether will be more vulnerable to sell pressure than Bitcoin.
“ETH would remain more vulnerable than BTC for three reasons: twice as much as selling pressure from natural sellers relative to market cap , lower odds of an ETF, lots of competitors versus no competitors.”
As a proof-of-work (PoW) payment-focused blockchain network, Bitcoin has absolute dominance over the market. But, as a smart contracts protocol eyeing a shift from PoW to a hybrid proof-of-stake (PoS) consensus algorithm, Ethereum faces competition from EOS, Cardano and Tron–three PoS smart contracts protocols designed to facilitate large-scale decentralized applications (dApps).
Moreover, while the Chicago Board Options Exchange (Cboe) has hinted the possibility of the launch of the Ethereum futures market, an exchange-traded fund (ETF) around Ether is highly unlikely in the near future.
The US Securities and Exchange Commission (SEC) has previously emphasized in its decision to deny nine ETFs from ProShares and Direxion that it does not intend to allow any ETF based on the futures market in the short-term, at least until the Bitcoin futures market increases significantly in size to have a profound impact on the global cryptocurrency market.
Kruger added that the immense selling pressure of Ether in comparison to Bitcoin also increases the vulnerability of Ether against abrupt market drops. He explained:
“Aggregated: $18.5 million ETH, $39.5 million BTC ; Market cap: $30 billion ETH, $120 billion BTC; Percentage of market cap: 0.06% ETH, 0.03% BTC. Twice as much relative supply hitting the market for ETH than for BTC.”
Is the Market Going to Experience Another Correction?
In an interview on Aug. 24 with Ran Neuner, leading digital asset exchange ShapeShift CEO Erik Voorhees stated that while the bear market is still in play, the worst part of the correction has come to an end. Building on his point, Voorhees said that the low price range of the cryptocurrency market presents a viable opportunity for long-term investors to accumulate.
Traders like Brandt and Kruger said throughout this week that the two-week stabilization period of Bitcoin is not enough for an asset class to initiate a mid-term recovery. While Bitcoin has experienced its most stable month in August in the past year, a few months of stability in the $6,000 to $7,000 region is favorable.
However, it is too early in the recovery process to call for a correction. Bitcoin has rebounded from $6,500 to $7,100 in the past week but it has remained in the $6,000 to $7,000 region for over three weeks since Aug. 6.
If Bitcoin and the rest of the market can sustain their momentum throughout September in the $7,000 price range and at $250 billion in market valuation, then it would be possible for the market to initiate a mid-term recovery without suffering another major correction.
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