ETH2 Is worth Monitoring; Accumulation Is Already Evidenced in ETHUSD

  • The first phase of Ethereum 2.0 (ETH2) is imminent.
  • Price may discount ETH2 phases in anticipation.

Ethereum’s development history is patchy. It has missed deadlines and hasn’t been clear about its future. To the point that some crypto investors have been pessimistic about the cryptocurrency. This is understandable given how slow the network is  i.e. the network throttles at 15 transaction per second (TPS). This, in contrast to Visa, which processes thousands of transactions per second. However ETH2, the next generation of Ethereum, may change the game.

ETH2 Aims To Improve Security and Scalability

It is envisaged that ETH2 will process thousands of transactions per second. This is a huge boast because the slow TPS is due to decentralization. However ETH2 is looking to increase the TPS whilst maintaining this decentralization. It will introduce the Proof-of Stake (PoS) mechanism as opposed to the Proof-of-Work (PoW) now in use. Instead of miners, validators mint new ether and process transactions. Security is enhanced by these validators “locking up” their ether. Misbehavior may result in ether being slashed introducing a hazard to breaking of rules.

ETH2 will introduce shards to improve scalability. Shards will be able to “talk” to other shards, effectively creating a massive network. A validator will only need to process and verify the transaction on a single shard. This info is then shared by the shard. Thus, scale increases substantially without compromising on security  (each shard shares the same security, so to break a single shard means to break the entire system).

To aid in the achieving the increase in TPS, ETH2 will also use plasma chains. These are semi-independent blockchains that can transact on the Ethereum main chain. This will allow for streamlining i.e. demand moves off the main net which allows for more efficient computing power.

ETHUSD is being Accumulated

Above we see the daily chart of Ethereum (ETHUSD). The bottom indicator is the on balance volume (OBV). Price has declined on an absolute basis since the beginning of March but the OBV has increased (green trend lines). I.e. more volume has gone into the instrument on up days than has exited on down days – a classic example of accumulation. This may be in anticipation of the rollout of the phases for ETH2. In this regard Vitalik Buterin, cofounder if Ethereum, has confirmed that this is still on track for a July launch. As such the volume patterns will prove  interesting and there is undoubtedly opportunity for CFD traders.