After the intense selloff in cryptocurrencies, investors may be more cautious about diving into Ethereum (CCC:ETH-USD) — and for good reason. This crypto may be continuing to give the still-largest coin in its asset class, Bitcoin (CCC:BTC-USD), a run for its money. But, after several months of running hot, it was more than ready to see a dramatic correction.
The overall cryptocurrency market could be attempting to recover. However, the correction may not be over just yet. The price of Ether (what the currency itself is called) is already down big from its all-time high of $4,362.35. Yet, given that it was trading for under $2,000 as recently as March, we may have a ways to go before it finds the floor. As of this writing, its current trading price is around $2,455.
Basically, we might see another major move lower before this is over. That said, while the near-term could remain rocky, another fall in the price may offer a great entry point for investors looking to make a long-term bet.
It could be a while before we see the “flippening” — the point where ETH surpasses BTC as the premier crypto. But, as its usage in blockchain transactions grows, Ethereum’s prospects remain strong after the volatility plays out.
Ethereum and Its Chances of Overtaking Bitcoin
In the short-term, it could be tough for ETH to get the ball rolling on a rebound. Many investors who got into crypto in recent weeks may continue to panic and cash out of their positions. We could still be far from things bottoming out. Once we get over the current choppy waters, though, will the road to the “flippening” be set to accelerate?
The spread between the market capitalizations of these two major cryptocurrencies has narrowed considerably. Back in January, the total value of all outstanding Ethereum was about 25% of the total value of all outstanding Bitcoin. But today? That number stands at around 42%. For a flip to happen, Ethereum would need to more than double while BTC treads water.
Of course, this may be a tall order. Lately, BTC has had to deal with many attacks and criticisms. Recently, Elon Musk cited its environmental unfriendliness. Others say it will wind up as the “AOL of the crypto age” (an early mover that quickly became irrelevant). Overall, the sentiment regarding its perceived value may be starting to shift — and not in a good way.
But on the other hand, recent fears of Bitcoin being left in the dust may be overblown. Look at the facts. For one, saying it has a big carbon footprint is a bit hyperbolic. Additionally, Ethereum and the crop of up-and-coming altcoins may demonstrate greater levels of utility. Yet, even if BTC serves more as a store of value than a medium of exchange, that doesn’t necessarily stop it from recovering the recent losses.
Competing Altcoins May Slow Down a Rebound
So, the flippening may not be just around the corner. However, that doesn’t completely destroy the bull case for Ethereum, either. After all, its widespread use in decentralized finance (DeFi) transactions points to a continued rise in price.
Admittedly, this factor isn’t guaranteed to perpetually stay in play. Just like how Ethereum gained in popularity at Bitcoin’s expense, other altcoins are starting to threaten this crypto’s status. Usage of competing coins in blockchain and DeFi transactions –such as Cardano (CCC:ADA-USD) — could accelerate.
This may not mean another round of considerable price declines for ETH, but it could limit how much and how soon the crypto bounces back after the recent selloff.
True, upcoming upgrades — which will help Ethereum get over scalability and high-transaction-fee issues — could keep the competition at bay. However, until it remains clear that ETH can stay well ahead of the pack, uncertainty could affect where it finds a floor and how quickly it can stand back up.
Approach Ethereum Cautiously, But It’s One of the Strongest Crypto Plays
The crypto market may be attempting to recover from its epic crash on May 19, but it may not be over just yet. Newbie crypto investors and traders could still be running scared. As such, they could continue to cash out.
In turn, this means Ethereum may have some room to fall before it finds a bottom. It’s hard to say what price this will happen at. Moreover, it may not overtake Bitcoin anytime soon. But, given its many strengths, consider this name one of the strongest plays in the crypto space, once we exit “meltdown mode.”