After hitting a low of $89.80 during the March market bloodbath, April has been a month of recovery for the second most valuable coin in the crypto sphere. Today, Ethereum tops its $200 resistance level and seems set to continue the rally.
It is easy to overlook every single altcoin as the Bitcoin halving draws near, but as the leading crypto looks set to skyrocket, its influence is felt across the entire marketplace, with some altcoins showing even more profound growth. Ethereum is certainly one of these this morning, experiencing almost twice as much percentage increase as BTC.
Although the progress of Ethereum has exceeded the 0.5 Fibonacci, some economists feel that this is still a phase of retracement from the drop that occurred on March 13th. Other, more enthusiastic investors, however, feel that this is the beginning of an upward trend and eagerly anticipate the currency to surpass the next major resistance level of $212 and validate the price as a new support.
In truth, both opinions could be correct. Ethereum is currently trading inside an ascending wedge very close to the minor resistance level of $205, which is considered by many as a bearish signal. The analysts who still hold a rather skeptical view, feel that the current retracement is inside the fourth of a five-wave Elliot downward retracement.
While it is possible that a breakdown could come from the $220 horizontal resistance or the resistance of the wedge itself, there are other factors, both internal and external that could definitely ignite fresh growth and continue an upward trend.
The upcoming Bitcoin halving is already affecting the price of Ethereum in a positive way, and the launch of Ethereum 2.0 will undoubtedly herald another dramatic increase.
Scales of Gray
Another contributing factor to a bullish season for Ethereum would be an increase in demand. Grayscale, the Ethereum trust that focusses on institutional investors, has recently been buying half of all newly circulated coins on behalf of its clients.
Since the start of 2020, the company has bought over 756,539 ETH, this is more or less half of the 1,563,245 ETH that has been mined during this same period.
Grayscale enables their investors to purchase securities that allow them to track the value of the coin at a 400% premium, without having to own any ETH for themselves. In order to accomplish this, the foundation must store large amounts of the 2nd leading cryptocurrency in its holdings.
Grayscale now owns 1.1% of the entire circulating supply of ETH. A likely reason for their bulk buying is the long-expected switch from a Proof-of-Work (PoW) protocol, to Proof-of-Stake (PoS) that will take place this year. Their 1% control of the network wouldn’t be a problem under the current consensus, but that could soon change, as PoS distributes newly created coins proportional to the amount being held.
The recent rapid accumulation of ETH could hypothetically accelerate Grayscale toward controlling over half of the network, where they would potentially have the power to censor transactions and even undo them.
So, while the purchase interest of Grayscale may have a positive influence on the near-term value of Ethereum, the community would do well to keep a close eye on the situation after the transition to Proof-of-Stake has been completed.