Understanding market volatility: an Ethereum approach (ETH)
Cryptocurrency has been a kind of volatile assets in recent years, and prices fluctuate greatly between ups and downs. The underlying drivers of this volatility are complex and multifaceted, but a key factor is the feeling of the market. In this article, we will deepen the world of cryptocurrency market volatility and specifically focus on Ethereum (ETH), exploring what drives its price movements.
What is market volatility?
Market volatility refers to the degree of uncertainty or unpredictability in the value of an asset. It can manifest in several ways, including changes in supply and demand, changes in the feeling of investors and changes in economic indicators. In the context of cryptocurrencies, market volatility can lead to extreme price changes, which makes it essential for investors to understand the underlying factors that drive these fluctuations.
Ethereum (eth): a cryptocurrency based on blockchain
Ethereum is an open source blockchain platform that allows the creation of intelligent contracts and decentralized applications (DAPPS). It was founded in 2014 by Vitalik Buterin and since then it has become one of the most popular and widely used cryptocurrencies in the world.
Understanding the volatility of the Ethereum market: key factors
Although the inherent value of Ethereum as a technological platform cannot be correlated directly with its price, several external factors contribute to its market volatility:
- Supply and demand: The constant influx of new users, projects and associations increases the demand of ETH. However, this increase in supply can lead to a decrease in the price if the total supply does not coincide with an equivalent increase in adoption.
- Regulatory uncertainty:
Governments and regulatory bodies worldwide are still dealing with the concept of cryptocurrency regulation. The uncertainty surrounding the legal status of ETH and other cryptocurrencies can affect the feeling of investors and make prices fluctuate.
- Global economic conditions: cryptocurrency markets are strongly influenced by macroeconomic factors, such as inflation rates, interest rates and GDP growth. A significant change in global economic conditions can lead to a domino effect on cryptocurrency prices.
- Technical indicators: Technical indicators, such as mobile averages, RSI (relative force index) and Bollinger bands, are used to measure the feeling of the market and predict price movements. However, these tools may be subject to bias and manipulation, which makes it essential to consider their limitations when analyzing market data.
Mercado’s feeling: a key engine of Ethereum’s price movements
Market feeling is a critical factor to determine Ethereum price movements. Here are some key ideas about the current feeling of the market:
- Alcista feeling: Strong support from institutional investors, risk capital companies and the main actors have contributed to increasing the upward feeling towards ETH.
- Bassist feeling: The growing concerns about regulatory uncertainty, safety risks and the impact of COVID-19 on the global economy have fed the bearish feeling.
- Neutral feeling: A balanced vision among market participants, with some investors who see ETH as a valuable asset for use in decentralized finance applications (DEFI).
Historical Ethereum Price Movement
To obtain a deeper understanding of Ethereum’s price movements, let’s take a look at their historical prices:
- 2014: ETH was introduced into the market and experienced rapid growth, from $ 0.25 to $ 1.08 in just two months.
- 2017: The price shot at a historical maximum of $ 1,400 in April 2017, only to collapse in October 2017 due to an important trick in the Ethereum network.
- 2020: ETH experienced significant growth during the COVID-19 pandemic, reaching a historical maximum of $ 4,300 in June 2020.