Recently, the volatility of the virtual asset market is fluctuating.
Bitcoin has recovered to $100,000, heating up the market again. As Bitcoin, the leader in cryptocurrencies, moves, expectations for the coin market are rising again.
I am currently paying attention to stocks that have experienced a sharp rise, specifically Ethereum.
In just a few days, Ethereum has surged. It has increased by over 15% in a day based on a 24-hour period and nearly 30% in a week, rising as the main character in the virtual asset market.
It is showing a higher return rate than Bitcoin's increase, so let's find out why.
Why did Ethereum surge in a short period?
First, let's take a brief look at the market structure.
During just one day, about $12 trillion worth of derivative positions were forcibly liquidated. Most of these were short positions anticipating a decline. In simple terms, this is called short selling.
A total of $340 million in Bitcoin and $280 million in Ethereum have been liquidated, which is approximately 400 billion won in Korean currency.
This refers to short positions, meaning investments expecting a decline, where forced liquidations have led to an influx of buying power, resulting in a sharp price increase. High-leverage investors were unable to escape the steep upward trend of Ethereum.
Let's look at the technical aspects of the surge. Recently, Ethereum underwent a large-scale network upgrade known as 'Pektra.'
This upgrade is evaluated as reducing transaction fees and significantly improving network efficiency, meaning that more transactions are processed quickly, enhancing the user experience.
Another change is that the staking structure has changed. Previously, validators had to stake 32 Ethereum to receive rewards, but now up to 2048 can be deposited in one account. This has created an environment where institutions holding large amounts can participate more.
As a result, this upgrade has lowered the entry barriers for institutional investors and optimized reward mechanisms based on compound interest, leading to a positive outcome.
Movements of institutions
Before the price of Ethereum exceeded $1900, more than 85,000 Ethereum were withdrawn from the global exchange Binance, amounting to about $200 million.
At the same time, over $1 billion worth of the stablecoin Tether was newly issued, indicating that institutions are likely entering the cryptocurrency market.
The buying momentum from institutions is an important signal for individual investors, which is one of the reasons for a positive outlook on Ethereum in the long term.
Changes in the global environment
Global political and economic factors are also influencing the price of Ethereum.
The signing of a trade agreement between the United States and the United Kingdom is seen as a positive sign that economic tensions are easing slightly. Trump's tariff policies are being relaxed, and there is a trend towards the normalization of global trade.
The investment sentiment regarding risk assets is recovering, and this is interpreted as being reflected in the virtual asset market.
The outlook for Ethereum is more favorable than for Bitcoin due to greater technical expectations, making it a structure conducive to concentrated investments.
Are there many investors wondering if they should buy now? Currently, the price of Ethereum is trading at about 3.2 million won. What do experts think?
In November 2021, the price of Ethereum reached an all-time high of $4,800, but now it is at about half that level. CryptoQuant states that the reason Ethereum is undervalued like this is because it is the first time since 2019, while Bitcoin is too high and expensive, and Ethereum is still undervalued.
Since it has fallen significantly from its peak, the simple thought that one should buy now is risky.
After a sharp rise, a correction inevitably follows, and if engaging in high-leverage investments, one must pay attention to risk management. In particular, the effectiveness of upgrades, the overall flow of funds in the market, and regulatory risks should be continuously monitored.
There are often cases where prices drop after a sharp rise due to the absence of events. Ethereum is gaining attention due to its sharp price increase, but it is not just a simple rebound.
With the large-scale upgrade of the network, inflow of institutional funds, and recovery of global investment sentiment, the outlook for Ethereum is turning positive.
Especially as the market's interest is focused on Ethereum, which is undervalued compared to Bitcoin, the upward trend is accelerating. While the surge is good news, just like stocks, profit-taking sales can occur with incoming funds when positive news arises, so it is important to closely check the risks involved.
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