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Just as retail investors were getting used to the idea of Bitcoin (COIN), another mysterious cryptocurrency has blasted onto the investment radar: Ethereum - and the fundamental case for investing in Ethereum looks strong for the remainder of June 2017.
Bitcoin currently trades for around $2,600 per coin on U.S exchanges while Ethereum trades for $360 per coin. In terms of market cap, the two coins are coming closer and closer to parity. Many believe this will signify Ethereum's "overtaking" of Bitcoin as the primary cryptocurrency via something called the "flippening".
It is unclear what the so-called flippening will mean in terms of Ethereum's price movement. But Ethereum's fundamental catalysts for upside are strong. The cryptocurrency will benefit from both the resolution of Bitcoin's scaling controversy (the two assets are highly correlated) and the launch of several new Initial Coin Offerings in the coming week.
Bitcoin's Scaling Controversy
Last week, the cryptocurrency space saw some downside due to disagreements about how best to scale Bitcoin. Bitcoin transaction verification times were slowing down substantially, and different parties disagreed on how best to address the issue. Now, however, the issue looks like it is finally coming to a resolution with big players uniting behind something called Segwit 2x.
According to Coindesk,
Mining pools AntPool, Bitcoin.com, Bitfury, Bixin, BTC.com, BTC.top, BW Pool, F2Pool, and ViaBTC (which represent about 71% of the network's mining power) are already adding a piece of text to each block that they mine to show their support. Once the code is ready for showtime on 21st July, mining pools will be able to run the software. The Segwit2x scaling agreement will require 80% of the mining hash rate to run the code for roughly three days starting on that date.
The resolution of Bitcoin's scaling issue is mixed news for Ethereum, albeit primarily positive. On one hand, Ethereum seems to have benefited from unwelcome political turmoil in its rival, Bitcoin. On top of this, Bitcoin's poor scaling slowed down the system, making Ethereum more appealing for commercial transactions.
However, despite these possible benefits for Ethereum, Bitcoin's controversy was hurting the price of all cryptocurrencies by delegitimizing the sector and confusing potential investors - many of whom use Bitcoin as a gateway into some of the other alternative coins that are based on it. With the Bitcoin scaling issue on its way to amicable resolution, Ethereum investors can benefit from some of the other fundamental catalysts for upside in the asset.
The Initial Coin Offerings
Ethereum is more than just a digital currency. It is also a platform for the development of decentralized blockchain-based applications. These applications use the Ethereum network to build a variety of different services that usually come with their own digital asset called a "token".
These start-ups are funded through what is called an Initial Coin Offering (ICO). To fund the new Ethereum-based projects, interested investors must buy Ethereum and use it to purchase the new token. This drives up Ethereum demand tremendously and is probably behind much of the asset's parabolic rise in the last few months.
According to Cointelegrah, an Ethereum-based token called Aragon was able to net $25 million in a mere 15 minutes. Two more promising ICOs, Civic and Status, are set to open to the public this week. Investors will only be able to buy these new tokens with Ethereum, and this could drive up the price of Ethereum during the fundraising period.
Conclusion
Ethereum is set to continue its strong performance for the remainder of June. The cryptocurrency has strong catalysts for upside including the upcoming resolution of Bitcoin's scaling issues as well as several large initial coin offerings that will be based on the Ethereum platform. As the value of Ethereum continues to rise, many observers predict it will replace Bitcoin as the largest cryptocurrency by market cap.
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