Ethereum investors expect volatility to increase as the US elections approach, given the regulatory uncertainty in DeFi. In contrast to the ETH ETF inflows, a few whales sold some of their holdings. If Ethereum bounces off the key trend line, it could regain the $2,395 level.
Ethereum (ETH) fell more than 4% on Thursday as the US election approaches and traders expect high volatility. Due to regulatory hurdles that the DeFi ecosystem has yet to overcome, the election results could trigger massive price movements for ETH.
Ethereum volatility increases ahead of US presidential election
Due to regulatory uncertainty surrounding the decentralized finance (DeFi) ecosystem, Ethereum traders expect volatility to increase as the US presidential election approaches. The main value driver for top altcoins comes from the large number of DeFi protocols that run on their blockchains. Therefore, DeFi regulatory hurdles may impact ETH performance.
Nick Forster, founder of DeFi options platform Derive, told FXStreet: “The upcoming US election could have a significant impact on ETH, especially due to its ties to the DeFi ecosystem, and depending on the election outcome, there could be regulatory implications. may face further scrutiny.”
Ethereum’s 30-day to expiry (DTE) at-the-money (ATM) implied volatility (IV) has increased to nearly 7% over the past year compared to Bitcoin. Forster highlighted that from October 25th to November 8th, the forward volatility of ETH and BTC increased significantly, increasing by 76.6% and 69.8%, respectively.
“This data shows that ETH’s increased volatility is a direct reflection of traders’ expectations of increased uncertainty, especially as the US elections approach.”
Several major crypto investors are backing Republican candidate Donald Trump in the upcoming election, as he promises to publicly recognize the industry and provide favorable regulation.
Additionally, many in the digital asset industry do not like Democratic candidate Vice President Kamala Harris due to the Securities and Exchange Commission’s (SEC) crackdown on crypto companies under the current administration.
Meanwhile, several Ethereum whales are being sold off following the 10% decline in Ethereum whales since October 1, according to Lookonchain data.
ICO whale trading
The Ethereum ICO whale, which received 150,000 ETH in its first online sale, has sold another 19,000 ETH ($47.54 million) in the past two days. The whale, which had been de-staking its assets, sold 5,000 ETH ($11.74 million) in the past 24 hours.
Conversely, the Ethereum ETF surprisingly recorded net inflows of $19.8 million on Wednesday despite the price drop, according to data from Pharside Investors.
Ethereum’s next move could be determined by major trend lines
Ethereum was trading around $2,340 on Thursday, down 4% from the day, with more than $65.8 million in liquidations in the past 24 hours, with long-term and short-term liquidations taking place, according to Coinglass data. They account for $57.55 million and $8.25 million, respectively.
Following sustained bearish pressure in the market, ETH fell below the $2,395 level on Wednesday. ETH is currently trying to move towards an important trend line extending from May 27th. A rebound from this level could send the highest-priced altcoin above the $2,395 level.
ETH/USDT daily chart
Considering that ETH’s highest demand region is between $2,316 and $2,383, this move may be favored by investors who want to prevent the price from falling below its cost basis. According to data from IntoTheBlock, investors purchased 52.58 million ETH in this range.
However, on a move below the trend line, ETH will find support between $2,100 and $2,207.
The Relative Strength Index (RSI) is below the neutral level and has a downward trend after breaking below the moving average. The Stochastic Oscillator (Stoch) is well into oversold territory, indicating that a possible reversal may be imminent.
If the daily candlestick closes below the $2,100 level, this theory becomes invalid.
Frequently asked questions about Ethereum development
After the merge, the Ethereum community is next looking at a sharding upgrade, expected later this year. This development can be summarized in four words: scalability through more efficient data storage. Software updates increase the capacity of the blockchain, expanding the amount of data that can be stored or accessed. At the same time, all services running on the Ethereum blockchain will have significantly reduced transaction fees.
A fork is the splitting of a blockchain after developers have agreed and proceeded to implement an upgrade. This decision will be made after these developers reach an agreement on software upgrades. In the next parts, one part will continue as is and the other part will continue with new features combined with previous features. A hard fork basically involves a permanent fork of a new sidechain from the original sidechain, while a soft fork does the same thing, the only difference is that it is temporary.
EIP-4844 is a proposal for improvements to the Ethereum network. This upgrade promises to reduce gas fees, which is a valuable service given the high transaction costs that continue to plague crypto players. This has been a long-standing concern for the Ethereum network. This proposal, also known as “proto-dunksharding,” has an unparalleled ability to increase transaction speeds on the Ethereum blockchain. At the same time, it also helps reduce transaction costs since everything is decentralized.
Gas Token is a new innovative Ethereum contract that allows users to tokenize gas on the Ethereum network. This means you can store gas when it’s cheap and start delivering it once the market moves north. The use of Gas tokens helps subsidize high gas prices in transactions. This means investors can do everything from arbitrage on decentralized exchanges to early purchases into initial coin offerings (ICOs).
