Ethereum (ETH-USD) is dropping sharply and continues to make $3,500 a point of resistance for the altcoin. The crypto market in general has been volatile for several reasons. One is U.S. monetary policy. Another is the Russian war on Ukraine. But the real catalyst for Ethereum remains the anticipated launch of Ethereum 2.0. At least one analyst believes this can take the coin to a price of over $10,000. If you’re thinking of starting or adding to a current position in ETH, it is important to keep your eye on the real prize.
So, why is Ethereum dropping today? Most likely, it is due to bullish sentiment on the dollar as a safe haven asset. Many analysts now believe the U.S. Federal Reserve (Fed) will make good on its pledge to whip inflation. And that means it is possible there could be a 50 basis point hike at the Fed’s next meeting. There has been a bearish correlation between cryptocurrencies and the dollar.
ETH may also be suffering from a perceived cooling of tensions between Russian and Ukraine. I use perceived intentionally because it is not likely that there will be a lasting peace for some time. Still, as Josh Enomoto stated recently, “For cryptos to continue rising, the incentive for decentralization must be present and powerful.” A stalemate in this conflict would, therefore, not be bullish for cryptos in general.
But both of those issues shouldn’t distract investors from the anticipated launch of Ethereum 2.0, which has bullish implications for Ethereum and its ETH token. The primary objective of Ethereum 2.0 is to change the consensus mechanism of the Ethereum blockchain from its current Proof of Work (PoW) protocol to Proof of Stake (PoS). With a Proof-of-Stake system in place, the network will have faster transaction speeds, volumes, and network scalability. It will also be significantly better for the environment.
Like many things in a decentralized world, delays are possible. The hope was that ETH 2.0 would have launched two years ago. However, if you believe that the launch of Ethereum 2.0 will increase Ethereum’s already strong appeal within the decentralized finance community, then continuing to scale into Ethereum prior to the launch should be a profitable strategy.
On the date of publication, Chris Markoch held a LONG position in ETH. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
