Here is Why an Ethereum (ETH) Bearish Trend Could Be in the Works for 2020
An Ethereum (ETH) bearish trend is on its way.
Ethereum (ETH) has had its tough times. The cryptocurrency token seems to be on the rise. As for trends, Ethereum (ETH) has been bullish for most of this year. A significant part of this has to do with the rise of Decentralized finance (DeFi).
It doesn’t mean that an Ethereum (ETH) bearish trend isn’t coming. The most active part of the crypto space currently is the DeFi space.
The DeFi Bubble is Rising
The current returns that are reminiscent of the 2017 crypto-bubble.
Prices in DeFi tokens are providing mind-boggling returns. So much so that just about everyone is now thinking of jumping in and “changing finance forever”.
It is the reason behind the current “gold rush” to the DeFi space. Many people within the crypto space think that having missed out on the 2017 bubble, they could gain from the current one.
It is the reason behind the recent surge of Ethereum (ETH) prices.
The current Ethereum (ETH) bullish trend is driven by the fact that ETH 2.0 hasn’t come on stream yet.
The many adjustments being made to the Ethereum (ETH) blockchain have made miners take advantage of the situation
So much so that gas prices are going up on the Ethereum mainnet.
Rise Gas Prices have Several Reasons
These rise in gas prices mean several things.
Firstly, the rise in demand for DeFi tokens and other blockchain-wide services has led to pressure on the mainnet. This rise in demand has led miners to select those transactions that pay higher gas prices.
These transactions get confirmed first. As such, there is increased competition. Higher gas prices then ensue. The ultimate end of this is pressure on the blockchain.
As the blockchain gets pressured, the Ethereum (ETH) prices rise.
Ethereum (ETH) Prices will Start Swinging Soon
At $237.57, Ethereum prices will test a resistance level of $240. Should that happen, then Ethereum (ETH) will range between $200 and $215 before taking off again.
Another factor for this will be the ongoing transition to ETH 2.0. As the world prepares for this transition, a lot of things are going topsy-turvy.
The reason for this is that the Ethereum Network is moving to Proof-Of-Stake (PoS). Miners would have to search for another Proof-of-work (PoW) blockchain to make a profit.
It will lead to the second wave of price drops below the $200 level. As Ethereum’s proof-of-stake model settles in, then things will move up.
One phenomenon that could drag this down is the “Bitcoin (BTC) effect”. Bitcoin (BTC) is known to affect the prices of all Altcoins. Any rise or drop in Bitcoin (BTC) prices will affect Ethereum (ETH).
This effect is currently not in play due to Bitcoin (BTC) prices moving sideways. As Bitcoin (BTC) prices begin to stabilize at around $9,500 less of this effect on the altcoins is occurring.
One thing is sure: Bitcoin (BTC) is about to make a major move. A move upwards could make Ethereum (ETH) break through the $240 level.
Asides that, the implementation of ETH 2.0 could also free Ethereaum from the Bitcoin (BTC) effect.
With new features coming onstream, the Ethereum community will have to grapple with the various issues that come with the launch of new technologies.
From bugs to security issues, the situation will remain fluid until the ETH 2.0 settles down to regular usage without problems.
It is another reason why an Ethereum (ETH) bear trend will occur.
The Defi Bubble will Burst
We are also going to see the DeFi bubble burst.
Like in all bubbles, people think that prices will keep going up. Once the black swan event that will spark the downturn occurs, the Ethereum (ETH) bear trend will strengthen.
Black swan events are known to create and stop market cycles. The rise of DeFi was the black swan event that started the current market cycle for Ethereum (ETH) prices. Another black swan event (expectedly to burst the current bubble) is already in the works.
Once it occurs, we shall see the market corrections and new support levels. After that, a whole new cycle will begin again.