Two weeks ago we talked in our Bitcoin and Ethereum rate analysis, the low level of volatility in the crypto market. In doing so, we forecast a massive increase in the volatility and a correspondingly strong price movement. In the past 14 days, a lot has happened and we have seen a massive Rebound in the market.
In this article we want to talk now about the concept of “Capital Roll-Over”effect. We also discuss, in short, Ethereum, and the aspect of scalability. Last, but not least, we ask ourselves the question of whether and how we can recognize the formation of bubbles, to answer the question of whether the train has left the station at the current heights from the BTC and Ethereum course already?
Following Bitcoin and crypto-currencies in General, the movements of the precious metals?
There is no doubt that 2020 is the year of the precious metals. Especially Gold find this year, an exorbitant demand, which is ultimately reflected in the price. The precious metals jumps up from the all time high to all-time and emphasizes its role as a hedge in the Portfolio.
But silver also experienced an upward trend and made it in a 7-year-old (!) To overcome resistance zone. Collectively, the precious metals to rise so significantly. Reasons for this are macro-economic in nature. The spectre of Inflation motivates investors to search for Alternatives. While the older Generation uses more of the precious metal, investing currencies, the younger Generation in Crypto. At the forefront of BTC is here, of course.
The following graphic from Square Cash stresses this Narrative, and shows clearly the growth, the Bitcoin is experiencing.
Where does the Ethereum rate increase? Capital Roll-Over Effect
In this context, we must ask ourselves the question, how do the recent rally comes on the market? To see flows such as in the graphic above new money in the market, since many people invest in currencies for the first Time in Crypto? Or the Ethereum course, as well as the rates of other crypto rises in all currencies instead by the existing traders shifting their money again and again?
At this point we come to the term of the Capital Roll-Over Effect. This is a simple concept that can be summarized as follows:
Simply put, describes the Capital Roll-Over Effect, the phenomenon that generated profits from an Asset flow into other Assets.
If investors or traders register profits due to an increase in the Ethereum course, they reinvest approximately this, for example, in smaller Altcoins. Another example is the recent explosions at some of the DeFi-Tokens are. The profits generated will flow, for example, back in BTC or ETH.
Capital Roll-Over Effect of DeFi to BTC and ETH?
The following graphic illustrates this effect very well. We can see here, namely, that the Defined Index is at its peak (engl. topped out) reached, as the BTC and Ethereum rate (20.07.2020) rose just at the right time.
The past is the past. In this respect, you will, of course, the question of whether, and if so, when the next Roll-Over Effect will take place? – The probability is great that now with BTC and ETH profits to flow backwards. This means that you need to be the Hype of the hour, namely, Decentralized Finance, benefit. At the same time, new Narrative, and other crypto arise, of course, always back the currencies for a long time in the shade, were found again the interest of some investors.
A final note here: When you Roll Over Effect, you should not necessarily think of you. Think more of a Person, the hit the optimal low-point for an investment. The probability is high that the profits earned are liquidated and a part of the profits in a different Coin flows, is evaluated according to his own opinion.
You can hunt either only the Pump, or worry about where the profits will flow.
Ethereum and the open book of the scalability
Scalability is a term that is inextricably linked with the crypto-scene, and block chains. In 2017, we had here a kind of “Trend-term”, many projects have used to push their ICOs. Thus, the statements exceeded the number of transactions per second, and those block chains, the “100,000 and more transactions per second” were able to perform, took the large sums of money.
During 2017 were sold at a value promise, we come now to the point where Ethereum serious problems with the scalability it has. The network is always clogged more often ” (engl. clogged). Even if Ethereum 2.0 will this issue without a doubt, to accept it, no-one should forget that the full implementation will still take 1-2 years. Even on Reddit it is, therefore, this is a Problem and looking for solutions.
To put it quite clearly: With the Launch of Ethereum2.0 in November, there will be no big leaps in the scalability. The risk and the responsibility is much too high, as that Ethereum could here cars short-term experiments. Technology requires time, and in this respect, everyone should be aware of this fact, and patience.
Ethereum rate increases: Roll Over Effect, and new demand
So we are already at the end of the article. Let’s get the most important aspects once again to summarize: The volatility in the market has increased significantly. Both BTC as well as Ethereum rates could rise in the last 14 days.
We are seeing increased activity, which is not only due to outsiders entering the market. An important role of the Capital Roll-Over Effect plays, the gains in other Assets generated will be redeployed. In other words: A large part of the gains of currently ‘inside’ of the Ecosystem.
Ethereum is in spite of an excellent performance in the center of the scaling debate. On Reddit, it already looks even after solutions. Even if Ethereum 2.0 comes, will allow an improved scalability of months to wait. Here is, as always, that technology takes time.
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