Ethereum (ETH), a cornerstone of the decentralized economy, has faced notable market volatility and garnered diverse perspectives from experts. Renowned economist Peter Schiff has predicted a potential drop to $1,500 for Ethereum amidst its current downward trend. Meanwhile, Franklin Templeton, a major player in global asset management, has released a bullish report on Ethereum, highlighting its technological advancements and potential as a key economic instrument.
Ethereum Price Plummets Below $3,000 Amid Broad Cryptocurrency Market Correction
On July 5, Ethereum (ETH) saw its price drop below the critical $3,000 mark for the first time in 50 days, mirroring a significant correction across the broader cryptocurrency market. The plunge in Ethereum's value to $2,871 sparked concerns among traders that the recent crypto bull run may have reached its end. This downturn was heavily influenced by a similar drop in Bitcoin (BTC), which fell to $54,953.
The total market capitalization of cryptocurrencies fell below $2 trillion on July 5, a level not seen since February 26. ETH’s decline from $3,450 to $2,815, an 18% drop, was in line with the broader market's 16% decline over three days. Analysts attribute this downturn to increased selling pressure on Bitcoin, rather than any Ethereum-specific factors.
On July 7, the Mt. Gox bankruptcy estate transferred 47,229 Bitcoin, valued at $2.6 billion, to a new address. This move, part of the process to start repaying creditors, saw some of the Bitcoin sent to a hot wallet of the Bitbank exchange. The development raised fears of a potential negative impact on Bitcoin’s price, as these coins could introduce up to $4.5 billion in selling pressure if offloaded onto the market.
Adding to the pressure, the German government has moved 7,583 BTC to exchanges since June 19, amounting to $415 million. The total coins held by German authorities stand at 42,274 BTC, valued at over $2 billion. This movement led to $936 million in liquidations of leveraged long positions over three days, including $235 million in Ethereum futures.
Traders are now concerned that the 2024 cryptocurrency bull run might be over, especially as this downturn coincided with the S&P 500 index reaching a new high on July 5. The stock market's positive response to the U.S. announcement of a rise in the unemployment rate for June to 4.1% was a notable contrast. A weaker economy tends to encourage interest rate cuts by the central bank, reducing the appeal of fixed-income investments and favoring risk-on assets like cryptocurrencies. However, Ethereum and other cryptocurrencies failed to sustain their bullish momentum despite these favorable conditions.
Ethereum Derivatives Metrics
Despite the current market scenario, Ethereum derivatives metrics do not indicate heavy hedging. In neutral markets, ETH's monthly futures contracts typically trade at a 5%–10% premium compared to ETH spot markets to compensate for the longer settlement period.
Data shows that the annualized ETH futures premium dropped to 8% on July 5, down from 11% a week earlier. While this level isn't particularly alarming, it is noteworthy given traders' expectations of a positive impact from the upcoming spot Ethereum ETF launch.
To assess whether the demand for hedging has increased following the recent price correction, the Ethereum options market can be analyzed. Typically, if traders anticipate a price drop, the ETH options skew metric will rise above 7%. Conversely, periods of optimism are often indicated by a skew lower than -7%.
The Ethereum options skew has remained relatively stable over the past week at -5%. It last entered bullish territory on June 26, indicating that the prevailing neutral sentiment has dominated for more than a week. On the positive side, there has been no excessive demand for downside protection while ETH's price fell below $3,000.
Despite a 15% correction, Ethereum derivatives have shown relative resilience. This does not necessarily mean that ETH will quickly regain the $3,300 support level, but it does suggest that professional traders are not preparing for further declines or rushing to hedge against additional price drops.
The upcoming launch of a spot Ethereum ETF in the United States might provide some positive momentum, yet predicting its impact remains uncertain amid the current market sentiment. As traders navigate these turbulent times, the resilience of Ethereum derivatives offers a glimmer of hope that the worst may be over, even if the path to recovery is uncertain.
Peter Schiff Predicts Major Ethereum Crash to $1,500 Amid Market Volatility
Meanwhile, renowned economist and crypto skeptic Peter Schiff has once again captured the attention of the crypto community with a bold prediction: Ethereum is headed for a significant drop, potentially crashing to $1,500. This comes as Ethereum struggles to maintain its value, currently trading below $2,900, marking a 30% decline from its March high.
In a recent tweet, Schiff highlighted that Ethereum is breaking through key support levels, drawing parallels to his earlier bearish predictions about Bitcoin. As of the time of writing, Ethereum has fallen 5.3% in the last 24 hours, trading at $2,872. Schiff noted that the market seems to be reacting prematurely to the anticipated launch of an Ethereum ETF in the United States.
"It looks like those buying the Ether ETF rumors couldn't wait for the fact to sell," Schiff commented. He suggests that investors who had driven up Ethereum's price based on ETF speculation are now exiting their positions, contributing to the downward pressure on ETH's price.
As Ethereum hovers precariously below $2,900, Schiff’s bearish outlook adds to the growing concerns within the crypto community. A drop to $1,500, as predicted by Schiff, would represent a significant decline and could further influence market sentiment. This pessimistic forecast comes at a time when the broader cryptocurrency market is already experiencing notable volatility.
Wider Market Volatility and Liquidations
Schiff's comments arrive during a period of heightened volatility in the cryptocurrency market. According to data from CoinGlass, more than $800 million in bullish crypto bets were liquidated over the past three days, marking one of the most substantial liquidation events since April.
Bitcoin has also fallen for the fourth consecutive trading session, part of a larger sell-off in the crypto market that starkly contrasts with recent record highs in global stock markets. Ethereum, in particular, has experienced more severe losses, with its price dropping by 10%.
The anticipated approvals for U.S. Ethereum ETFs are a significant factor to watch in the coming weeks. However, interest in these products may be mixed if the current crypto sell-off continues. Investors are also closely monitoring upcoming U.S. jobs statistics, expected later this week, to gauge the U.S. Federal Reserve's policy stance. Recent soft economic indicators have bolstered the case for the Fed to ease monetary policy in the coming months, which could impact investor sentiment in both traditional and crypto markets.
While the market grapples with Schiff's dire predictions and the ongoing volatility, the performance of Ethereum and other cryptocurrencies will be closely scrutinized. The potential launch of an Ethereum ETF could have significant implications, but its impact remains uncertain amid the current market conditions.
Franklin Templeton's Bullish Outlook on Ethereum: A Tech Development and Economic Instrument
On a more positive note, Franklin Templeton, a veteran wealth manager with over $1.65 trillion in assets under management (AUM), has recently shared its bullish perspective on Ethereum. Despite fierce competition in the blockchain space, Ethereum remains a cornerstone of the decentralized economy, continually unlocking new opportunities for its community. The asset management giant’s latest report, "Understanding the Value of The Ethereum Network," provides an in-depth analysis of Ethereum's technological impact and its potential as an economic instrument.
In its comprehensive report, Franklin Templeton highlights the most crucial features of the Ethereum blockchain, detailing its challenges and opportunities. The report brings attention to how Ethereum has advanced beyond Bitcoin’s initial accomplishments to create a robust and accessible technology foundation for distributed ledger applications, fostering a comprehensive decentralized economy.
The introduction of the Ethereum Virtual Machine (EVM) and its Solidity smart contracts marked a significant shift in application development, positioning Ethereum as the foundation for a myriad of decentralized applications (dApps) across both business-to-business (B2B) and business-to-consumer (B2C) segments.
Franklin Templeton’s analysts emphasize the critical role of Layer 2 (L2) networks in enhancing Ethereum’s performance and decentralization. These L2 solutions, built on top of the Layer 1 (L1) Ethereum blockchain, are instrumental in scaling Ethereum’s capabilities. The report notes:
"Collectively, L1 blockchains (Ethereum and others) and L2 blockchains provide the foundations for 'Web3,' the new iteration of the World Wide Web (WWW) that enables users’ WWW ownership."
This evolution towards Web3 business models is paving the way for a novel network economy and a new approach to commercial transactions. By creating a protocol-based economy that encourages democratized ownership and rewards participation, Ethereum has managed to establish a vibrant, diversified protocol economy.
This economy includes novel use cases in decentralized finance (DeFi), gaming finance (GameFi), non-fungible tokens (NFTs), the metaverse, and other trending segments.
Ethereum ETFs: A Game-Changer?
The report also highlights Ethereum’s unique combination of features, such as being a native peer-to-peer payment network, a common developer toolkit, and a virtual machine for executing smart contracts. These attributes have set a new standard for blockchain technology.
In addition to its technological innovations, Franklin Templeton is actively participating in the Ethereum spot ETF race in the United States. The firm filed with the U.S. Securities and Exchange Commission (SEC) for an ETF approval in February 2024. There is growing optimism within the industry that Ethereum spot ETFs will receive regulatory approval soon, potentially as early as this month.
Nate Geraci, president of The ETF Store, has indicated that the final approval of the S-1 forms is expected by July 12, with the possibility of ETF trading commencing shortly thereafter, around July 15.
Franklin Templeton's report paints an optimistic picture of Ethereum's future, emphasizing its critical role in the burgeoning Web3 landscape. As Ethereum continues to evolve and overcome its scalability challenges through innovations like Layer 2 solutions, its position as a leading blockchain platform appears increasingly secure.
The potential approval of Ethereum spot ETFs could further enhance its market presence, attracting more institutional and retail investors. This development is anticipated to have a positive impact on Ethereum’s price and market dynamics, reinforcing its status as a vital component of the decentralized economy.
As the final decision on the Ethereum ETF approaches, the crypto community and investors will be closely monitoring the outcome. A successful approval could mark a significant milestone for Ethereum, further solidifying its role as a major player in the global financial and technological landscape.
