Ethereum’s price has seen some very bullish momentum lately, meanwhile, Bitcoin’s dominance continues to decline
Since April 24th, ETH’s price has gained more than $1000. From a total market capitalization of $260 billion on the 24th, is it now sitting at around $390B market cap.
But what is giving Ethereum such a bullish momentum right now? The price is moving fast, and so is the adoption. Meanwhile, on the Bitcoin dominance chart, BTC is on a steep decline recently, and I would be tempted to put the blame on Ethereum. Bitcoin was the first real cryptocurrency, which has enabled a new, instant means of payment, as Satoshi envisioned. But since the launch of Bitcoin in 2009, the crypto space has evolved a lot.
Even more so since the launch of Ethereum, in 2015. And then the launch of smart contracts on the protocol changed everything.
Defi ecosystem and NFT boom
From payment systems to custodial services. Marketplaces such as OpenSea or stables coins like DAI or USDCoin. Credit and lending, derivatives trading. There are ever-increasing dApps running on top of the Ethereum protocol, and those decentralized applications also have increasing users adopting them.
If you don’t know what are NFTs and what are they used for, you should read this article.
The most used DEX (Decentralized Exchange), Uniswap, where you can trade cryptocurrency pairs between each other, is also a big user of the ETH protocol. Uniswap’s liquidity pool has doubled since the beginning of the year, going from around $4B to more than $8B.
I tend to agree that the recent surge in Ethereum is mainly fueled by the increasing adoption of Defi, NFT’s, and other applications built on top of Ethereum’s blockchain. This was recently explained in Cathie Wood’s ArkInvest newsletter.
Usage of the Ethereum network is increasing and, by some measures, outpacing that of Bitcoin, as shown below by the number of active wallets and total transaction fees. In our view, Decentralized Finance (DeFi) and Non-fungible tokens (NFTs), both of which are burgeoning, explain Ethereum’s recent breakout.ARK Invest, May 03, 2021
Ethereum’s price surge doesn’t come to much surprise to me. It was shown recently that as adoption comes, sometimes problems or unintended consequences might loom around. The expansion of the Ethereum ecosystem and increased adoption was followed by ever-increasing congestion and expanding GAS fees.
Gas or GWEI are payments made in Ethereum that compensate for the computing required to process and validate transactions. As more users wanted their transaction included in the next block, there was often a bidding war that would send the transaction fees through the roof. It was seen by many as a scaling problem that would have to be fixed in order for ETH to continue to grow.
Berlin and London update
Recently, the Berlin update was launched on the main net, which has steadily reduced gas fees for the past 2 weeks. And then, EIP-1559 will be packaged with the London hard fork this coming July. The London Hardfork aims to cut down on gas fees even more.
The EIP not only takes control of setting fees; it will burn or permanently “lose” a portion of each fee once it’s collected. The burning of those fees means some Ethereum will disappear completely, forever, decreasing the already scarce supply.
At around 19h45 EST, ETH price had a small decline, allowing some steam to blow off. But then, it bounced on the Ichimoku cloud and 0.382 Fibb. As of 21h45 EST, it is trading at around $3300.