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Ethereum – The Calm Before the Price Storm

CryptocurrencyAug 30, 2021 11:01AM ET
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Ethereum – The Calm Before the Price Storm

  • A crypto market flippening is imminent as Ethereum demand for block space allocation grows.
  • Ethereum’s supply is contracting with the network having burned a total of 109,000 tokens since implementing the EIP-1559
  • Ethereum’s price level rising above the $3,200 mark is a bullish indicator for additional price increases.

The prominence of ICOs, DeFi, and NFTs has emphasized that Ethereum retains smart contract platform supremacy, while also showing dire demand for improvement to its network efficiency. Ethereum holds first-mover advantage, and on-chain data and community consensus catalogue Ethereum as a catalyzing network for making blockchain, and off-chain integration achievable. The EIP-1559 upgrade is thus one factor amplifying investor’s interest.

Upgrades for the Better

The initial hypothesis of transforming Ethereum into a proof of stake network was met with criticism from miners, who saw the development as an injustice to their involvement. However, Vitalik Buterin underlined the value Ethereum’s deflationary stance will have on Ethereum’s future, incentivizing further network participation from miners.

The Beacon chain, or the ETH 2.0 dashboard, shows that a total of 7,2 million ETH is currently staked on the network. Additionally, the network has burned 110,000 ETH since the release of EIP-1559, transforming ETH’s position in the market as supply and demand interplays change.

EIP-1559 is not the sole update to have been forced onto the network by developers, as EIP-3554 will provoke more changes to the network, irreversibly increasing mining difficulty. While the latter upgrade was delayed by six months, it stirred concerns about “bribing miners.” AllianceBlock‘s CEO argued that the delay was meant for miners to “accept EIP-1559 in order to continue building Ethereum 2.0.”

Bullish On-Chain Data

Ethereum has posted 355% year-to-date gains, which has led to investors reconsidering their investment choices. Grayscale and other investment funds opened Ethereum and other ERC20 token trust funds, increasing investor exposure to the currency, especially in the U.S., where crypto trading volume and adoption are attributed to institutional capital.

According to Bloomberg, Ethereum contracts are trading at an 8.37% premium compared to 6.58% in Bitcoin. What’s more, is that on-chain data shows that Ethereum has surpassed Bitcoin in terms of total volume traded. Coin Metrics data suggests, in August alone, $185 billion ETH has been traded, compared to $180 billion BTC.

A delay in the EIP-3554 incentivized network activity, with a 9% daily increase in gas activity. As a result, gas prices reached a new three-month high, with average gas prices on August 25th reporting a value of 102.28, which shows that block space requests are increasing on the Ethereum network.

On The Flipside

  • The Ethereum network was forced to fork after a bug affected 50% of clients.
  • The value of an ETH is still speculative because it relies on how much others value it.

The $100,000 Flippening

Activity on the Ethereum network has picked up with NFT transactions on OpenSea surpassing those on DeFi platform Uniswap, as Anton Bukov’s tweet illustrates a striking difference in trading volume. Thus, with Ethereum at the forefront of each new blockchain trend, it can be argued that the network has intrinsic value as it fosters a new form of off-chain connectivity.

Ki-Young Ju from Crypto Kuant highlighted in a tweet, that Ethereum is “closer to ATH than BTC” due to the same interplays that helped Bitcoin reach new highs: scarcity and demand. Similar arguments prevail on social media, which further indicates the possibility of flippening occurring much sooner than expected.

While other smart contract platforms are rightfully challenging Ethereum’s network hegemony, it is worth noting that Ethereum’s first-mover advantages are complemented with a higher LTV and use cases. While Solana might pose a threat to Ethereum, platforms such as Cardano have yet to integrate their smart contract functionality.

Why You Should Care?

Market valuations should be reflected in the use case the network adds to the entire blockchain ecosystem. Bitcoin has transformed into a store of value, while Ethereum is becoming a used platform for securing digital transactions. As technology innovates rapidly, it is unlikely that this will be the ranking 10 or 20 years from now.

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Ethereum – The Calm Before the Price Storm
 

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