How has Ethereum Fared in Price and Reputation in Light of Terra and Tether?
The de-pegging of Terra and Tether has had wide repercussions for the crypto market. Click here to find out how Ethereum’s price and reputation has fared.
Last month, cryptocurrencies Terra and Tether came face to face with a situation that was never meant to happen. The situation in question had wide-spanning implications for the entire crypto market, not least with Ethereum, which dropped by 23% in the fallout. But to contemplate how Terra and Tether have affected Ethereum, it is first essential to understand what happened to the stablecoin in the first place.
The Stablecoin Debacle
As self-professed stablecoins, both Terra and Tether are pegged to a tangible asset in the form of $1 US dollar. While the rest of the crypto market can rise and fall substantially, often unpredictably, coins like LUNA or Tether are supposed to stay pegged to $1, meaning investors are more secure and assured that they will not be affected by mass-market fluctuations.
Last month, however, many wealthy investors attempted to short sell UST by borrowing large amounts of Bitcoin, which ultimately caused UST to de-peg from the US dollar. This led to a downward spiral that affected Tether and Terra and the wider cryptocurrency market as a whole.
The Impact On Price Of Ethereum
Terra creator, Do Kwon, had previously bought billions of dollars worth of Bitcoin as a failsafe. When this was utilised to re-peg the stablecoin, a mass of downward pressure was placed onto the market, which subsequently caused other investors to sell their coins and drop the value of Bitcoin. Being the largest coin in the market, any fluctuation for Bitcoin has a ripple effect on other coins, which is why Ethereum also faced a seismic drop in its respective valuation.
Like Bitcoin, November 2021 saw a dizzying new height for Ethereum’s valuation, with ETH reaching over $4,800. After the stablecoin situation, the price of Ethereum is now sitting at $1,900. But while the price of Ethereum has fallen, this does not necessarily mean that its reputation overall has been affected.
Ethereum’s Growing Reputation
The very nature of cryptocurrencies (or, most specifically, non-stable cryptocurrencies) is that their price will rise and fall depending on the demand from investors. In this way, the price of Bitcoin and Ethereum will depend on how many are coming through the door and investing in their future.
This then depends on their reputation. For Ethereum, this reputation is only growing. With a building interest in NFTs and the metaverse, Ethereum is on track to outperform Bitcoin in the coming years, but it is also being predicted to overtake Bitcoin entirely within the next decade.
Put simply, although the events of Terra and Tether have undoubtedly affected the price of Ethereum for the moment, the reputability of Ethereum will inevitably save it from a crash impossible to climb out of.
The Reason For Ethereum’s Reputation
The most integral reason for Ethereum’s positive reputation is its move to become one of the first sustainable, environmentally friendly crypto coins. While many have been concerned about the mining process and its connection to electricity wastage and power consumption, Ethereum has turned the situation on its head by announcing the introduction of POS (proof of stake). This will mean that the blockchain's validation will be done purely by randomly assigned validators, cutting down the energy consumption of minors who are competing against each other to validate a block and earn themselves more coins.
With the environmental crisis currently at the forefront of the political conversation, crypto’s vision for the future must tow in line with the future’s environmental ideals. With POS, Ethereum has shown its intention to do just that. Proof of stake will ensure that the future of Ethereum is sustainable, which has subsequently attracted a lot of new investors and will surely attract many more when the system comes to fruition.
The Future Still Looks Bright
Ethereum is still transitioning into Ethereum 2.0, which is the main reason why its reputation has not yet led to this massive influx of investors. While the future still looks bright for Ethereum, it won’t be until proof of stake has been effectively proven to work that we will see that reputation being represented in droves of new investors and higher valuations.
One thing is for sure: the fallout of Terra and Tether’s de-pegging is not set to affect Ethereum negatively in the long run. It is still a crypto coin. As with every crypto coin, the valuation is rising and falling. With POS, however, the future is looking positive. The best thing for investors to do is ride the storm and believe in the reputation that Ethereum is making for itself.
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