A year ago, the "crypto winter" was in the bones of many investors. This term stands for the enormous drop in the price of digital currencies. The most significant cryptocurrency, bitcoin, was trading at only about one-fifth of its late 2017 peak in mid-March 2020. The Corona pandemic, of all things, has given the segment an unprecedented spring. Prices have been pointing steeply upwards for months. According to the portal CoinMarketCap, the cumulative market capitalization of all cryptocurrencies has increased almost six-fold to around USD 1.5 trillion within a year. Bitcoin accounts for a good 60% of this sum. Ethereum follows in second place. In terms of performance, the payment instrument known as "Ether" for short has no need to hide. On the contrary: with a 12-month increase in value of 570% in relation to the US dollar, it is far ahead of bitcoin. For the BTC/USD duo, it went up 454% in the same period.
Ether is more than just a cryptocurrency. In 2013, Vitalik Buterin enhanced the Bitcoin idea that was created in 2008. The programmer designed the decentralized platform Ethereum, based on blockchain technology. Business processes can be handled or applications offered there. Ether serves as a means of payment for the contracts created in this virtual universe, in the technical jargon smart contracts. The asset manager Grayscale, which specialises in cryptocurrencies, estimates the daily volume of transactions processed via Ethereum at USD 12 billion. A maximum of 18 million new Ether can be created in a year via the mining process. Analogous to Bitcoin, users provide computing capacity for the encryption of transactions and are remunerated for this in the cryptocurrency.
CME Group also played a role in the recent acceleration of the ETH/USD exchange rate. On February 8, the U.S. futures exchange launched futures on Ether for the first time. "We believe this provides our clients with a valuable tool to trade and hedge this growing cryptocurrency," CME Group said in explaining its move. Ether has already been part of Leonteq's underlying universe since November 2019. Initially, the Zurich-based issuer launched tracker certificates denominated in USD (symbol: UETHTQ) and CHF (symbol: CETHTQ). Later, a participation product in the trading currency EUR (symbol: EETHTQ) was added. Regardless of the underlying currency, it has been difficult to deny a certain overheating in the crypto universe. Ether, for example, has moved surprisingly far away from the 200-day line in relation to the US dollar.
In this respect, the development at the beginning of the week is not surprising: after the ETH/USD duo climbed above the USD 2,000 mark for the first time last Saturday, February 20, there was strong profit-taking. Tuesday morning, Ether was trading more than a fifth below its recent top. After this setback, the uptrend launched around Christmas is wavering. Should this steep line actually break down, weak support would be waiting at USD 1,550. A stronger support opens up between USD 1,300 and USD 1,400, where numerous highs and lows set in January and February come together. Looking to the upside, the outlined 2,000 mark represents a hurdle to be taken seriously for the cryptocurrency. Conclusion: Investors must continue to expect hot flashes, i.e. considerable volatility, in this market - however, it does not look like a new "crypto winter".
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