As The Upgrade Wraps Up, Still Hold Off on Ethereum Classic
If you follow the crypto market, you likely know about Ethereum Classic (CCC:ETC-USD) and its in-progress Magneto upgrade. As I detailed earlier this month, this upgrade doesn’t add much to its utility. But it at least allows it to keep up technologically. This could allow its price to remain steady, as cryptos overall are on the precipice. That is, either set to pull back further, or ready to start mounting a recovery.
In other words, that means that the largest driver for ETC will likely be the crypto market’s next move. If factors like regulatory scrutiny become more top of mind? We could see another overall sell-off for digital assets. Another factor that could mean lower prices ahead for crypto: lower levels of retail investor trading. Retail-focused brokers like Robinhood have already warned that crypto trading on its platform could soon slide.
On the other hand, factors like the overall upgrading of cryptocurrencies may itself spark a recovery as the second of 2021 progresses. That being said, the key takeaway here is that, for now, a bullish bet on ETC-USD is more a bullish bet on the direction of cryptos overall. And with names like Ethereum (CCC:ETH-USD), this name’s more successful spinoff, with more factors on their side, it still doesn’t seem worthwhile to bother dabbling in this one.
What Will Likely Drive The Next Move for Ethereum Classic
Some may see the Magneto upgrade, which wraps up by the end of this month, as something that could lead to higher prices for ETC-USD. But given the fact that upgrade, while needed, doesn’t do much to make this blockchain a formidable competitor to Ethereum, or the “Ethereum killers” like Cardano (CCC:ADA-USD), I’m doubtful that this development is enough to drive another rally.
Instead, I see Ethereum Classic continuing to move in tandem with the overall price movements of Bitcoin (CCC:BTC-USD), Ethereum, and the other major altcoins. Again, it’s hard to tell today whether cryptos are set to make further declines. Or, if we are close to the start of a recovery.
Crypto prices took a big dive on July 19, as uncertainty from the Delta variant of Covid-19 rocked financial markets in-general. But as of this writing, the crypto market appears to have shrugged off Delta variant concerns. This of course could change, if the Delta variant outbreak continues to get worse. The same uncertainty applies to a rebound as it does to a further correction. Upgrades may do the trick to win back investor interest. Yet, besides what I said above about possible continued waning interest among retail traders, signs point to a similar drying up of interest among institutional investors as well.
If you lean bearish, this points to staying away from ETC-USD, as it may have yet to bottom out. If you lean bullish? You may still want to avoid it. Why? The next bull market for cryptos may not provide the kinds of outsized returns seen in the last one.
Why ‘To The Moon’ Moves for ETC Could be a Thing of the Past
If crypto prices overall bounce back, chances are so too will Ethereum Classic prices. But if you believe this means this token can go from around $43 today, back to the $176.16 high it hit before the May meltdown? Think again.
Why? Unlike the now-passed crypto bubble, we may not see the kinds of “meme-driven” outsized moves smaller cryptos once experienced. As one Motley Fool commentator recently discussed, the wild ride with ETC had more in common with “memecoins” like Dogecoin (CCC:DOGE-USD).
The next go-around? A future rising tide of crypto prices may raise its boat. But it’ll likely not be to the extent seen earlier this year. Instead, it could go up, but underperform relative to BTC, ETC, and the rest, as the more established coins move along with their respective upgrades, that help take them to the next level.
Barring Ethereum Classic fast-tracking an upgrade on par with Ethereum’s 2.0 upgrades? Future gains (if any) may not be any more spectacular than the gains generated by higher utility coins, if or when a recovery finally happens.
When it Comes to Betting on a Crypto Recovery, Stick With The Stronger Plays
Putting it simply, the above-mentioned Magneto upgrades likely aren’t going to spark a big move higher for ETC-USD. What will? A shift out of “bear market mode” and back into “bull market mode,” for cryptos overall.
Much remains in play that could sink cryptos further. But even if a recovery is on the horizon, there’s little to suggest that buying Ethereum Classic is the way to play it. Stick to buying Bitcoin, or the higher-utility altcoins, if you believe a rebound will soon happen.
On the date of publication, Thomas Niel held long positions in Bitcoin and Ethereum. He did not have (either directly or indirectly) any positions in any other securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Thomas Niel, contributor for InvestorPlace.com, has been writing single-stock analysis for web-based publications since 2016.
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