ARK Invest Reveals Bullish Ethereum (ETH) Outlook, Says Crypto Markets Move Back to Risk-On Environment
An analyst at investment management firm ARK Invest says Ethereum (ETH) may start to gain more bullish momentum as crypto markets swing back into a risk-on environment.
In a new interview on the For Your Innovation podcast, ARK analyst Frank Downing says the dust is settling in the crypto markets after months of bearish price action.
“I think we’ve seen something interesting just in the last month, which is when the markets were going down and we’re in this kind of capitulation cycle, you had assets at the riskier end of the spectrum, so ETH and assets that are built on top of ETH compared to Bitcoin, sold off very hard, not necessarily trading on fundamentals, but markets go completely risk-adjusted.
Just in the latter half of July, I think it started to turn around, and we saw that the market gradually at the margins started to trade more on fundamentals.”
A risk-off environment typically refers to a period when riskier assets such as crypto and stocks are sold in favor of safe haven assets such as the US dollar.
Downing then makes the bull for Ethereum centered around the highly anticipated transition from a proof-of-work consensus mechanism to a proof-of-stake, which is slated to happen in mid-September.
“In ETH’s case, this was mostly about progress being made around their transition, the network’s transition to proof-of-stake consensus called The Merge. Although this has been expected for over seven years since the network launched, we are now closer than ever to the transition actually happening…
[The latest testnet] showed promise that The Merge is actually going to happen and so many parties that have had this technical risk and execution risk in the past, as well as the changes in ETH’s tokenomics that reduced token issuance and the narrative around proof-of-stake consensus compared to proof-of-work has led to great interest in buying ETH as a token.
And so we’ve seen the ETH/BTC pair, or the price of ETH relative to Bitcoin, outperform, which has been a departure from the risk-off period that we’ve seen. So relatively, [the] the market is back to risk for these types of assets.”
According to Downing, the strength of Ethereum is a net positive for the long-term health of the digital asset space.
“This is something we like to see, this long trend of ETH increasing in value relative to Bitcoin as a sign of the growing strength of the crypto ecosystem as a whole.
If you look at what we classify as the financial and internet revolutions compared to the monetary revolution embodied by Bitcoin, that represents about 50% of the crypto market and ETH is the dominant asset in that bucket. So seeing this strength is net bullish for crypto as a whole.”
Ethereum is trading at $1,480 at the time of writing, down 5.6% on the day.
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