The Non-Fungible Token (NFT) market is the hottest new cryptocurrency, but it’s unclear if a platform like Ethereum is poised to capture these gains. An NFT is the registration of ownership of a digital object on a blockchain. An NFT is a right to a stake in the ownership of a collectible such as art or wine. It can be any media, including but not limited to art, videos, music, games, or even tweets. Non-fungible means the object is unique, making it irreplaceable. For example, crude oil with the same gravity and sulfur content is fungible, and you can trade it anywhere in the world. The Monalisa is a unique piece of art that is non-fungible.
Most of the main NFT projects on Ethereum are marketplaces for digital collectibles. Some of these market places have thousands of daily active users, with their weekly transaction volume climbing to millions of dollars. The movement toward NFT’s has put Ethereum back into the limelight. The cryptocurrency has ran up 417% in 2020 and is poised to test higher levels. The technicals are also strong, which in conjunction with this new impetus, could help Ethereum move higher.
Why are NFT’s Important?
NFTs can be a catalyst in transforming the economics of creative activities. By allowing an artist to monetize directly with their fans. An NFT is on the blockchain, allowing the buyer of the NFT to prove that it is an original piece. This type of transaction will also allow an artist’s content can be sold globally on decentralized marketplaces. Additional NFTs also have a feature that pays the artist a percentage every time the NFT is sold or changes owner. This royalty feature will allow a songwriter to capture the royalties of a song on an NFT. Instead of being copied by millions of users for free, an artist can reap the song distribution gain.
The Notional Value has Been Robust
While some of the auction houses have moved to some NFT models, there have been videos and GIF that have seen strong demand. An NFT video by beeple sold for $6.6 million, and someone paid $3,600 for a gucci ghost GIF, and a collection of digital furniture by andrés reisinger made $450,000. According to DappRadar, the top 3 NFT products are NBA Top Shot, Crypto Punks collectibles – based on Ethereum, and OpenSea, an NFT exchange.
Is This a Game-Changer for Ethereum?
While the activity in the NFT space may seem like yet another game-changer for Ethereum, there are some issues the world’s largest altcoin has to address. The scalability issues continue to endure. DApp developers have also been trying to build NFT-exclusive chains since 2018. Crypto-punk collectibles, based on Ethereum, despite being one of the top three NFTs in the market in terms of daily transaction volume, trails NBA Top Shot significantly. At the moment, NFTs are still a relatively new and emerging market, and just as institutions doubled down on BTC in 2020, 2021 may see a similar influx concerning NFTs. Given Ethereum’s promise as a platform, this year could be the year ETH gains massively.
How Did 2020 Treat Ether and What’s to Come
It should not go unnoticed that Ether surged 470% in 2020 and is poised to test higher levels in 2021. The cryptocurrency’s initial movement increased, but as riskier assets came under pressure in mid-February, the cryptocurrency pair declined in value.
The upside for Ethereum looks bright, and the technicals point to higher prices. Ethereum is forming a cup and handle pattern, which is a pause that refreshes higher. The cryptocurrency has held support near the 50-day moving average and is poised to test the all-time highs near 2K. The 10-day moving average has crossed above the 50-day moving average, meaning that a short-term uptrend is now in place.
Medium-term momentum is positive as the MACD (moving average convergence divergence) index generated a crossover buy signal. This scenario occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line. The MACD histogram also generated a crossover buy signal. The histogram pushed through the zero-index level. The MACD histogram is printing in positive territory with an upward sloping trajectory which points to higher price for Ethereum.
Short-term momentum is also positive. The fast stochastic, which is a momentum oscillator, generated a crossover buy signal in oversold territory. The buy signal occurred when the fast stochastic was printing a reading of 15 below the oversold trigger level of 20, which generally foreshadows a correction. The fast upward movement of the fast stochastic reflects accelerating positive momentum. The relative strength index (RSI) also moved higher but has recently flattened, which could reflect consolidation in the price of Ethereum.
The Bottom Line
What is clear is that a new impetus has arrived that could allow Ethereum to gain further popularity as NFT’s take off. Recall, and Non-Fungible Token is a stake in an asset, which could include collectibles and media and tweets. The token gives the buyer the right to that product. Ethereum is in a strong position to allow the development of NFT’s on its platform and further gain traction as a platform that will provide access to NFT’s. After gaining more than 400% in 2020, Ethereium is poised to gain further. Momentum has turned positive, and the trend in cryptocurrency is upward sloping. The combination of a new impetus and positive technicals could point to higher prices for Ethereum.