An analyst at investment management firm ARK Invest said Ethereum (ETH) may start to gain more bullish momentum as crypto markets return to a risky environment.
In a new interview on the For Your Innovation podcast, ARK analyst Frank Downing said as dust settles in the crypto markets after months of falling prices.
“I think we saw something interesting last month, which was 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 ETH versus Bitcoin are selling very hard, not necessarily trading fundamentals, but markets are getting completely risky.
Just in the second half of July, I think it started to turn and we saw the market gradually at the margins starting to trade more fundamentals.
A risky environment generally refers to a time when riskier assets like crypto and stocks are sold off in favor of safe-haven assets like the US dollar.
Downing then makes the bullish case for Ethereum centered on its highly anticipated transition from a proof-of-work consensus mechanism to a proof-of-stake mechanism, which is expected to take place in mid-September.
“In the case of ETH, it was mostly about progress being made around their transition, the transition of the network to a proof-of-stake consensus dubbed The Merge. Although it has been anticipated for more than seven years since the launch of the network, we are now closer than ever to the reality of this transition…
[The latest testnet] showed the promise that the merger is actually going to happen and so many parties having that technical and execution risk in the past as well as the changes to ETH tokenomics that reduced token issuance and the narrative around of proof-of-stake versus proof-of-work consensus have generated a lot of interest in buying ETH as a token.
And so we saw ETH/BTC, or the price of ETH versus Bitcoin, outperform, which was a divergence from the risk-free period that we saw. So relatively, [the] the market is back to risk for these types of assets.
According to Downing, Ethereum’s strength is a net positive for the long-term health of the digital asset space.
“It’s something we like to see, this long trend of increasing value of ETH relative to Bitcoin as a sign of the growing strength of the crypto ecosystem as a whole.
If you look at what we categorize as the financial and internet revolutions versus the monetary revolution embodied by Bitcoin, that’s about 50% of the crypto market with ETH being the dominant asset in that bucket. So seeing this strength is definitely bullish for the 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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