Ethereum will hardfork in the near future. Traders are wondering how this will impact the price for ETH and ETC? While the price for BTC has maintained its longterm upward trend, Ethereum has stumbled recently. Since Oct 4th, the price for ETH/BTC has gone from 0.022 all the way down to 0.0186 today. This represents a 15.5% decline in the price of ETH over the past few weeks. The lending market has also experienced price declines. The price to lend/borrow ETH on Bitfinex has declined to 0.292% (less than 1% annualized simple interest), while its offered at 3.87% annualized on Poloniex.
The low price to lend/borrow ETH on both Bitfinex and Poloniex represents the market’s perception that the price for ETH and ETC have reached a near term low. Traders are less willing to borrow a currency they perceive will rise. I believe this relationship between the lending/borrowing rate and the price of the underlying is showing up more consistently. The lower the price to lend/borrow means the more likely markets think the price will rise. This makes intuitive sense since if I expect that value of an asset to decrease in the future, I’m more likely to demand a higher rate of income in the meantime. Consider two pieces of real property, one in a high growth location, and another in a low growth location. I would expect to accept a lower rate of interest in the high growth location and a higher rate of interest in the low growth location. This makes the choice between the two locations closer to neutral, and brings other investment criteria into play. The consistently high rate to lend/borrow USD on Bitfinex represents the market’s inherent bullish bias for bitcoins.
Ethereum’s community has reached a general understanding that the best way to move forward and address the month long dos of the network is a quick hardfork. A matter of urgency has been added following a recent backlog of more than 12,000 transactions and some miners opting in for zero transaction blocks.