People from all over the world are looking to include them in their portfolios. There are many advantages to owning digital money, from transparency and accessibility to censorship resistance. So, it’s no surprise that although cyber coins are new compared to traditional holdings classes, they’ve also become exceedingly popular in a relatively short time.
As such, it should be no surprise that investors are looking to buy Ethereum more than ever before. Despite the difficulties the digital asset markets navigated over the past year, investors remain interested and continue their transactions. However, while 2023 started on a promising note, with prices beginning to climb again after experiencing a considerable slump in 2022, it seems that the larger crypto market will have a lot of work to do before achieving its heights from November 2021.
Undervaluing
Ethereum underwear has had successive waves of price fluctuations lately. After finishing 2022 on a downward trend, January brought in a change, and the prices began climbing back up. However, since then, under pressure from regulators, which brought many exchanges and crypto-friendly banks to heel, prices began taking a few steps backwards again. There are many reasons for this, ranging from the increased selling pressure to the lower liquidity that makes the markets more volatile.
However, according to expert analysts and seasoned traders, some cryptocurrencies might be significantly undervalued compared to their actual worth. The most prominent example in this category is Ethereum. Researchers have cited several reasons for their beliefs, including the usage, market dominance, adoption rates and blockchain engagement, to determine that ETH’s actual value is actually much higher.
While currently trading below $2,000, Ether has already achieved this milestone once this year, following the launch of the Shapella upgrade in mid-April. Then, the craze surrounding the Pepe meme coin caused significant profitability for the validators on the Ethereum blockchain. However, the steep increase in gas fees associated with performing any type of transaction deterred many for a while.
Given the current market situation, it might still be some time before Ethereum will be appreciated at its authentic worth for its market dominance and its contributions to blockchain technology and decentralized functions.
Banking crisis
The economic situation worldwide has been challenging since 2022. Inflation soared high, and now, in 2023, all countries expect that they will have to deal with economic decline and stagnation. Economists have predicted that a recession between April and June, or between the July to September quarter, is highly probable. Many have expressed the view that this challenging financial situation will allow the digital currency sector to develop unchallenged or at least have more room to grow and develop.
To solve the banking crisis, some legislators have urged for the development of a holistic approach to the situation, believing that adding even more rules to the 200,000-page long stress test on which the Federal Reserve operates might not be able to offer any solution. Some have discussed how focusing on only one single strategy creates a misdirected sense of security, overlooking other potential issues, such as long-term trends.
Crypto analysts have expressed the view that the economy could be rejuvenated by adopting the cryptocurrency mindset. Decentralization might provide the answer, given that cyber coins weren’t hit so seriously during the ongoing crisis. Some have pointed out that cryptocurrencies have been created mainly to withstand such situations. This is why you can notice that, historically, when the economy is navigating a tough time, cryptocurrencies tend to flourish.
Investors have also been using digital coins as a hedge against inflation. Crypto’s defining characteristics, including its censorship resistance and lack of intermediaries, make it a trustworthy financial instrument, for some, far more believable than traditional fiat currencies. The fact that the market is also highly transparent and what you see is what you get is also ideal for many, especially in the constantly changing economic climate.
Beacon Chain
The Ethereum core developers have recently launched patches in response to the recent blockchain outages. On the 11th of May, the system experienced issues when it had to confirm transfers. The problem, whose cause remains unknown, persisted for nearly thirty minutes. A similar thing occurred the next day, this time lasting for over an hour. The fact that the two outages happened in the span of twenty-four hours caused many investors to become concerned, particularly as what exactly occurred remains in the realm of speculation.
Network reliability is one of the fundamental factors attracting users and, therefore, capital. Developers in charge of blockchain infrastructure believe there’s no reason to be alarmed but agree that the situation isn’t ideal. And while some have said that the lack of finality didn’t directly impact the transactions or halt transfers, the applications and financial product services operating within the network might have to modify their operations to avoid similar situations in the future.
Some startups have temporarily paused deposits as they continue to investigate what happened. The general advice is to use the patches when available and switch to a minority client if feasible.
Further regulations
While the price of cryptocurrencies started off on the right foot at the beginning of the year, regulatory influences have caused it to become vulnerable. As the efforts persisted and progressed, the fate of digital coins became more uncertain, and liquidity was impacted. Recently, a leaked memo showed that authorities plan to classify all crypto as securities.
According to lawmakers, this would provide a more manageable approach to ordinances and ensure that the market can ditch all the companies that might not be operating in the clients' best interest. Since the beginning of the regulatory crackdown, consumer safety has been one of the main concerns, with legislation aimed at avoiding the possibility of illicit transactions and malicious individuals who would try to incorporate digital finance into their schemes.
The cryptocurrency market has yet to regain its complete stability, and there will still be challenges along the way. Investors must remain prepared for the future to protect their assets.