Ethereum rose 15% today after reaching a bottom of $253 yesterday in what appears to be another sharp V shaped recovery for the currency.
The crash was seemingly mainly caused by bitcoin which fell by nearly $1,000 yesterday from $3,000 to around $2,000, to somewhat recover today to $2,4000.
The crash appears to have mainly been caused by increased uncertainty regarding bitcoin’s future with suggestions that the currency could potentially split into two come August the 1st.
A sell-off in bitcoin therefore ensued, dragging down ethereum, probably because of arbitrage bots, nearly halving its price before recovering.
However, there may be a more benign Technical Analysis (TA) explanation. The price point of 3,000 is most probably a strong psychological resistance line, while 420 has always been a resistance point.
After bulls blazed through $300 in ethereum and were seemingly headed straight for $1,000, we should have expected bears to make a surprise strong movement at $420, with everyone else helping them by taking profits.
That probably gave everyone a little panic, explaining the speed and depth of movement, but will the upwards leg now blaze through $420 just as it did through $300, will it sideway or might it actually turn downwards?
That’s a question everyone is probably asking, with the analysis complicated by bitcoin which has seemingly been pushing down all digital currencies while eth appears to try and lift them up.
The mood in bitcoin is probably bearish because the network is operating at over capacity with fees rising and rising while there is no solution in sight except for a chain split if neither side backs down.
While in ethereum the mood probably remains very bullish after a torrent of good news with potentially more to come. So, those two sentiments are likely fighting it out, giving us a bit of a rollercoaster.
Bitcoin, however, shouldn’t have this much effect on ethereum, but the BTC/ETH arbitrage bots are probably keeping the two tied in a straight line.
So they may continue to prop up or down each other until one of those long promised decentralized exchanges for altcoins is finally launched.
For any fiat pair, a decentralized exchange is difficult if at all possible because you need a centralized bank account. For digital currency to digital currency, however, it should be fairly easy, especially with eth smart contracts.
So one of the eth developers may decide to get it all running and peg all digital currencies to eth, rather than to bitcoin, at which point the two may be unpegged.