Are you banking on Ethereum Classic (CCC:ETC-USD) making a big move higher after the Magneto hard fork? Don’t give your hopes up.
This event, which wraps up on July 21, will result in lower transaction fees and greater security, for this blockchain which is technically the “original Ethereum.”
But it’s not likely to be something that enables it to rally back to its high ($175.16), much less let catch up to its better known (and significantly more valuable) spin-off, Ethereum (CCC:ETH-USD).
Instead, with its utility still well behind not only its counterpart, but that counterpart’s aspiring “killers” as well, chances are ETC-USD will continue to flounder. Or worse, head lower from here, as the crypto market remains challenged.
I wouldn’t throw the towel on Ethereum Classic completely, however. One factor could give it an unanticipated advantage down the road. That being said, this still isn’t one of the best opportunities out there. With this, there’s little reason to dive in ahead of the July 21 event.
Ethereum Classic and the Magneto Upgrade
As I wrote June 17, the Magneto upgrade, which mostly consists of changes already implemented by Ethereum in its Berlin upgrade, doesn’t appear to be much of a game-changer. It surely helps Ethereum Classic to keep up. But it’s not going to dramatically improve its utility, particularly when it comes to DeFi, or decentralized finance.
This points to the upcoming hard fork having minimal impact on the Ethereum Classic prices. And that’s assuming the crypto market continues to trade sideways. Upgrades in general could be what puts this asset class back into bull market mode.
As you may know, it’s not just the two Ethereums that are putting into place upgrades. Cardano (CCC:ADA-USD) has a big one coming up. Even Bitcoin (CCC:BTC-USD) has announced one due to go live later this year.
The forthcoming upgrades may help fuel a market-wide rebound in cryptos. Yet, the near term could remain volatile. Some analysts, including those at JPMorgan, anticipate further price declines, as the space overall continues to heal.
What does this mean specifically for Ethereum Classic? Given its traded around $50 for the past month or so, it may appear to have found its floor. However, if another crypto sell-off happens? Expect this one to pull back further and give up more of its 2021 gains.
Does this mean you should steer clear? For now, yes. But at lower prices, maybe not. Considering one of its advantages, it may still have a shot of becoming a winner for crypto investors in the long term.
Hope’s Not Completely Lost
Admittedly, I’ve been critical of Ethereum Classic as a long-term opportunity. Mainly, due to the fact that ETH itself may have equal, if not greater, rebound potential than ETC. Also, given the strengths of top Ethereum killers like Cardano, it seems like a waste of time to tie up capital in this name.
On the other hand, Ethereum Classic may have room to increase, not decrease, its presence in the world of blockchain. With this it could still deliver strong returns in the years to come. As two of my InvestorPlace colleagues, Josh Enomoto and Muslim Farooque, have pointed out this month, it all comes down to its continued commitment to “proof of work.”
Ethereum’s move from “proof of work” to “proof of stake,” in conjunction with its 2.0 upgrades, may help it get over the scalability and transaction fee issues that have long plagued it. Yet, it could backfire. In his recent article, Farooque pointed out how the move to “proof of stake” could introduce vulnerabilities for its platform. Per Enomoto’s view, moving away from “proof of work” could disincentivize miners and network contributors, given greater efficiency means less profit for them.
This potential fallout for Ethereum Classic post-upgrade probably won’t result in a big move by participants over to ETC. But it could help drive a modest boost in its usage. In turn, this may enable Ethereum Classic to make an (eventual) trip back toward its past triple-digit coin prices.
It’s Too Soon to Buy
The Magneto upgrades may fail to put points into the price of Ethereum Classic. If the crypto market remains in bear market mode, further declines could be in the cards as well. It may still also be one of the less appealing opportunities among altcoins. Yet with its possible advantages, thanks to its use of “proof of work” rather than “proof of stake,” it may still have a shot of becoming a winner.
Even so, with little immediate need to buy it today, the best move with Ethereum Classic is to wait for lower prices.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.