First the price of Ether will rise

Raoul Pal: first the price of Ether will rise, then that of riskier altcoins

Raoul Pal argues that higher-risk altcoins will follow the growth of Ether, whose price rose 60% in the first two

On 15 January, as the cryptocurrency Bitcoin Evolution market shows signs of a bullish continuation, Raoul Pal, CEO of Real Vision Group and a well-known investor in Bitcoin (BTC), was optimistic about the price of Ether (ETH). In addition, Pal announced plans to add „higher risk altcoins.“

Altseason on the way?

Following Bitcoin’s rally towards $42,000, many alternative cryptocurrencies have seen strong performances, in line with the historical positive trend in Q1.

The rise of the altcoins was partly driven by the momentum of Ethereum. After conquering an important resistance level at $600, ETH continued its rally by surpassing $1,000.

ETH currently sits near its all-time high at around $1,400, following a 60% rise in the first two weeks of 2021. Pal tweeted:

„However, ETH is up 60% in the first 14 days of the year. I believe it will outperform throughout the year. I still own a lot more BTC, but I am adding ETH. Next will be the highest risk altcoins…. but much smaller. More risk = smaller size.“

Perhaps due to market sentiment around ETH improving, altcoins have also seen particularly positive performances this past week.

As reported by Cointelegraph, large-cap altcoins, such as Polkadot (DOT) and Cosmos (ATOM), have seen considerable gains against both Bitcoin and the US dollar since the beginning of January.

At the same time, several decentralised finance (DeFi) tokens, such as Aave, and SushiSwap, have significantly outperformed both Bitcoin and Ether over the past two weeks. The data confirms continued growth in sentiment and social media activity in recent months.

The bullish trend in DOT and ATOM could be attributable to the frenzy around DeFi tokens, considering the increased demand for alternative blockchain networks.

Recently, Ethereum’s network has become increasingly congested as user activity on the DeFi protocols has increased, thus increasing the cost of fees.

Wangarian, capital allocator at DeFi-focused fund Defiance Capital, responded to Pal:

„In all seriousness, decentralised finance will blow you away if you remove the negative biases associated with altcoins. Quality projects: $AAVE $SNX $UNI $YFI.“

What’s next for ETH and altcoins?

On 7 January, in a Twitter thread, Pal said he believes Ether could get between $10,000 and $20,000 if it follows the same cycle as Bitcoin.

In support of Ether’s bullish outlook, Pal cited Metcalfe’s law, which states that the effect of a telecommunications network is proportional to the square of the number of users connected to the system:

„Ooops… ETH looks just like BTC, Metcalfe’s law seems to be the key to the price of both ETH and BTC. But ETH’s market cap is growing faster than BTC at the same point (from the first million active addresses). ‚Really? ETH’s price structure is identical to BTC’s when it had the same number of active addresses? But, but, I thought it was just a useless shitcoin???‘

„Yeah, ETH might well go to $20,000 in this cycle (exactly like BTC in its last cycle, but ETH will be bigger in terms of market cap)“

Yeah, ETH might well go to $20,000 this cycle… (exact same as BTC last cycle, by market cap ETH will be bigger)
– Raoul Pal (@RaoulGMI) January 7, 2021

Although there is no specific correlation between Ether and the rest of the altcoin market, if Ether becomes a billion-dollar blockchain protocol, major projects developed on Ethereum could grow proportionally.

In particular, DeFi tokens could benefit most from the network effect and rapid expansion of Ethereum if the latter grows at the same rate as Bitcoin in 2016.