In their new research report, ‘Entering the Ethereum‘, Delphi Digital has outlined and analyzed the short and long term sustainability of Ethereum with the coming updates and stiff competition.
Ethereum 2.0, the serenity update is expected to be completed by the year 2021 (estimated). The new serenity update will implement PoS and sharding to improve scalability and reduce transaction cost. However, there are other platforms like EOS, Cardano, and Tron which offer faster transactions and scalable ‘smart contracts.’ However, Ethereum still leads the pack in terms of market capitalization and popularity in the crypto community.
Ethereum is the second-ranked cryptocurrency w.r.t. market capitalization. The dominance of Ethereum over the cryptocurrency market on 21st April 2019 is 10.1%.
DeFi (Decentralized Finance) on Ethereum
DeFi, Decentralized Finance, is a new system of interoperable finance that aims to build a ubiquitous system of financial products based on blockchain and smart contracts.
“Over 2 million ETH are currently being staked in DeFi Apps as of March 3rd, 2019.”
However, the research also revealed that MakerDAO stakes 98% of the total Ethereum currently staked in DeFi systems. Hence, if DeFi gains considerable momentum, then higher Ethereum stakes can be expected to open up. DeFi provides a financial system that is accessible to anyone with the internet.
With the days of the ICOs behind us, the Ethereum reserved for new tokens is expected to the be 0 (Zero) in 2019. Moreover, approx 275k Ethreum is staked per month to facilitate the DeFi systems, which is expected to increase with time. However, the miners are also releasing new coins every 2 minutes. Hence, it creates more selling pressure than buying.
Correlation Between Crypto-Assets
Delphi Digital statistically also confirmed the crypto-assets are currently coupled significantly with Bitcoin. The trend started soon with the beginning of the bear markets. According to the report, the correlation between price movements in Bitcoin and Ethereum has been strong for the past 12-months.
“Given the extremely high intra-market correlations we previously discussed, this is a trend we are monitoring closely as ETH may be poised to outperform if BTC rallies.”
On a cautionary note, the longs to the short ratio on Bitfinex hit extreme lows during December which was followed price rise from $85 to $150. Furthermore, the long to the short has reached its five-month high.
Long Term Concerns in Ethereum 2.0’s Development
Delphi Digital conducted a comprehensive study of the proposed plans with Ethereum 2.0. According to their analysis, while the newly proposed mechanism will reduce fees and accommodate more projects, there is a substantial barrier to entry because of the ‘Gas fees’ currently.
Moreover, the PoS network will necessarily require a large number of users on the platform. The research added:
“A diversified and profitable validator network is crucial for the security and longevity of thenetwork, but that’s unattainable under the currently proposed specs without significant network fees. At the same time, expansion of network fees will only occur with substantial dapp growth and general adoption, and that’s difficult to imagine being built on a network that’s not considered secure.”
The price analysis from the Research also revealed that while Ethereum has entered the over-bought region according to RSI. However, Ethereum has maintained bullish momentum many times after reaching this level in the past.
Last but not least, the report also included the Dapp report and comparison with the EOS platform.
The report mentioned that there are over 2000 Dapps developed on Ethereum and EOS. However, they are still complicated to use and needs improvement.