ARK Invest Analyst: Crypto Markets Moving Back to Risk-on Environment, Ethereum Could Start Gathering More Bullish Momentum

An analyst at investment management firm ARK Invest says Ethereum (ETH) could start gathering more bullish momentum as the crypto markets pivot back to a risk-on environment.

In a new interview on the For Your Innovation podcast, ARK analyst Frank Downing says that the dust is settling in the crypto markets after months of bearish price action.

“I think we’ve seen something interesting just in the last month, which is when the markets were heading down and we’re in this kind of capitulation cycle, you had assets on the riskier end of the spectrum, so ETH and assets that are built on top of ETH in comparison to Bitcoin sell off really hard, not necessarily trading on fundamentals but markets going completely risk-off.

Just in the latter half of July, I think that started to turn and we saw the market incrementally at the margins starting to trade more on fundamentals.”

A risk-off environment generally refers to a period when riskier assets like crypto and stocks are sold in favor safe-haven assets like the US dollar.

Downing then makes the bull case for Ethereum centered around its highly anticipated transition from a proof-of-work consensus mechanism to a proof-of-stake one, which is slated to occur mid-September.

“For ETH’s case, this was mostly around progress made around their transition, the network’s transition to proof-of-stake consensus dubbed The Merge. While this has been anticipated for really over seven years since the network launched, we’re now looking closer than ever to that transition actually happening…

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[The latest testnet] showed promise that The Merge is actually going to take place and so many parties having this technical and execution risk in the past as well as the changes to ETH’s tokenomics that reduced token issuance and the narrative around proof-of-stake consensus compared to proof-of-work have led to a lot of interest in purchasing ETH as a token.

And so we’ve seen the ETH/BTC pair, or the price of ETH relative to Bitcoin outperform, which has been a divergence from the risk-off period that we’ve seen. So relatively, [the] market is back to risk-on for these types of assets.”

According to Downing, the strength of Ethereum is net positive for the long-term health of the digital asset space.

“This is something that we like to see, this long trend of ETH increase in value relative to Bitcoin as a sign of the growing strength of the crypto ecosystem as a whole.

If you look at what we classify as the financial and internet revolutions compared to the monetary revolution which is embodied by Bitcoin, that represents roughly 50% of the crypto market and ETH being the dominant asset within that bucket. So seeing this strength is net bullish for crypto as a whole.”

Ethereum is trading for $1,480 at time of writing, a 5.6% drop on the day.