Ethereum greeted 2019 at around $130 and is set to greet 2020 at around $130 this new years eve.
For much of the year, ethereum has gone up and has gone down, but in the end it didn’t really go anywhere with no gain nor loss over the year.
Unlike bitcoin, which has nearly doubled this year from circa $3,500 to now $7,000, ethereum is more echoing bitcoin 2015 in a fairly flat year.
Bitcoin back then did finally manage to find a direction near the end of the year, but for much of 2015 it was very flat, up and down but still around the same price level.
Much as ethereum this year, which after a stratospheric rise to $1,400 has found itself in a two years long bear market with a 2018 worse than 2014 even for bitcoin, and with a 2019 that looks very similar to 2015.
Does that then make 2020, 2016? Well, in some ways. They both are a halvening year. They both are more than two years after the last “bubble.” They both come at a time when plenty wonder whether this will ever rise again. And at both times the wider world has kind of forgot about crypto.
Ethereum in particular has faced the same lifting of delusion as bitcoin in 2015. The ICOs that were its use case, as bitcoin’s use case for payments back then, turned into a burden during bear because like merchants insa-sell without care, so too the ICOs.
The Vitalik vision for scalability, like that of Satoshi, is stuck in years not months, but there are areas where it could get interesting.
OUT with Blockchain, IN with Defiance
The rise of the blockchain, beginning as early as 2014 but with more speed in 2016, is one big reason for the rise of bitcoin in 2017.
The launch of ethereum may have also propped up bitcoin because initially you needed BTC to get ETH.
As ethereum is Turing complete, however, it does not require a whole new blockchain network for a new invention.
Instead, anything codable can be coded in eth, including somewhat primitive but fully automated banks.
One use case for example can be simply savings with DAI providing an interest rate 10 times bigger than banks.
Arguably banks can never compete because they have offices, they have employees that want fat bonuses, they have considerable costs which obviously are paid by the bank user.
All this is replaced in ethereum by dirt cheap code – cheaper than even the cheapest labor in gulags – which needs no human. In fact at some point, once it becomes clear the Maker DAI contract is safe, some Nakamoto might just fork it and set it in stone, forever unchangeable.
For now, the invention is still very young and has much room for development, but the concept has generally been proven. It is starting to get out of the beta phase.
From Defi to Tech Revolution
Some of these smart contracts are very complex and to create dai you need to put eth, manage collaterals, hedge, arbitrage perhaps, bot code price management strategy, and basically be your own bank.
From an end users’ perspective, however, you don’t have to care about any of that. All you need to know is: has the contract been hacked and if not, how long has it been running?
That’s an imperfect measurement of “safe,” but it’s a fairly decent way of generally having a feel of how much risk there might be at a technical level.
Then instead of creating dai and managing all these collaterals stuff, you can just buy it with eth.
So let’s say you have $100,000 in savings (yer right!), and you think stocks are maybe a bit too high, or that the dollar will strengthen, or you just want to have some fairly quickly accessible savings.
Bank based savings accounts are for the latter, but if you leave it there you’ll lose money due to inflation as banks give basically 0% in interest for an instant savings account.
So instead you can take $10,000, turn it into tokenized dollar dai, send it to the blockchain savings account, and get 4% a year.
For that, you first need to buy eth and turn eth into dai. If a significant number did this, eth’s price might rise. So perhaps it would be wise to keep at least a bit of that eth, instead of turning it all into dai.
If a significant number did this and kept some eth… well you can probably see where we going.
2020, The Rise of ETH?
As ethereum, at least for now, is the gateway to a whole new world of innovation in the defiance space, it may be the case the asset is undervalued, and perhaps significantly so.
That’s to be expected because just as bulls get euphoric and lose touch with reality, so do bears.
The latter have arguably been given plenty of bear reasons, but now that all this bearness has been let out of the system, it’s not clear what other negative is to be said about eth.
Yes, upgrades have been delayed because complex, or minecraft, or who knows. You might not even be sure whether they will ever launch.
Yes, eth devs, like bitcoin devs, can be arrogant with bad communication skills and dismissive of “investors.” Some have even left, slowing down things.
There’s no clear monetary policy – well, technically. Practically the intention is to reduce inflation to near zero.
All them ICOs sold and sold and many of them have nothing to show for it, with smart contracts still backdoored as a rule. That makes them semi-decentralized.
But throughout two years of bear all of this came out, and much more, yet ethereum still spent a year flat at $130.
Presumably that means all the negatives have been priced in, and the market still thinks – even very stubbornly – that eth is worth at least $130.
So if it can’t go down any further, presumably that means it has to go up because a lot of the potential has been overlooked during the bear, and things like the Dai Savings Rate launched only a few weeks ago.
That might seem like only one thing, but defi is or can be a raft of applications that basically slowly and gradually automate more financial services and improve upon banks as well as other financial entities.
Moreover the delay of upgrades has been priced in, but it’s not too clear whether their potential launch has been priced in as well.
Does the market for example really believe that ethereum’s inflation will fall to near zero or maybe even negative through fee burning?
Has potential demand to get interest through Proof of Stake (PoS) on a digital asset that has significant network effects been priced in? What of the out of market locked eth once PoS goes out? What of the new plans for sharding that start with turning eth1x into a PoS shard, with then other shards presumably revolving around it. Meaning the current ecosystem, with its synergy and all else, is kept as one.
We could go on, but ethereum has been declared dead this year and as you all know, what is dead can never die.
So it will probably rise again because there’s a lot of work to be done, there are a lot of low fruits to pick, there’s a lot of innovation that is being built, is in the process of being launched, and some in the drawing board or even not there yet.
The business model of Compound for example is a pretty interesting one. As it happens, you don’t quite need a token to fund open source projects.
And where it comes to valuation, if we take just one aspect like potentially automating some banking services, and we say a 20% chance of gaining even 1% of that market, we’d still be speaking trillions.
It’s not the strongest that survive, nor the most intelligent, but those more adaptable to change.