Can Ethereum double or triple its price from the current position? I am sure that a lot of people are asking this question. In this article, we take a look at the current situation of Ethereum as well as what the main advantages of Ethereum are. Furthermore, we will discuss some the upcoming demand.

Fees and Demand

Let’s begin with one of the most annoying, and in my opinion worst things, about Ethereum: the transaction fees. The main drawback of Ethereum at the moment are the exorbitant fees people have to pay for a transaction. This is one of the biggest reasons why people are looking for competing alternatives like Solana or Binance Smart Chain. The more important question that needs to be asked though is why are those fees so high? The main reason why these fees are so high is the intense competition for block space that is going on right now. Because Ethereum has one of the biggest eco systems there are several different applications running on this blockchain. This means that demand is naturally very high and has to be paid with gas. On the other hand, this can also be seen as a good thing because despite the high gas fees Ethereum is the most popular blockchain around.

Advantages

If we look at Ethereum from the pure utility point of view, Ethereum seems to be unrivaled. This is due to two major things going on right now. Namely: DeFi and NFTs. DeFi demand for ETH is at record highs. According to defillama.com, the total value locked in smart contracts on Ethereum is at an all time high. There are thousands of Dapps that are being built on the ETH blockchain that are meant on being used in the DeFi space.

DeFi is not the only use case that is competing for that ETH block space. Let’s not forget the demand for stable coin settlement. While Stable coins like Tether and USDC are issuing on other blockchains as well, the bulk of their supply has been issued on the ETH blockchain. With those two out of the way, the thing that is taking the most space in the Ethereum blockchain are of course our beloved NFTs. This craze is upon us and it is not showing any signs of slowing down yet. The reason for that is because they are bringing a whole new class of users to Ethereum that otherwise would not be interested in crypto. Among these are people who are: music fans, collectors, sports fans or gamers. You just have to take a look at the statistics of OpenSea to understand the madness that is going on. For those who don’t know, OpenSea is the biggest platform for NFT trading right now.

Supply & Upcoming Events

So far, we just looked at the current demand side of Ethereum. Now we have to cover the supply side as well. One of the biggest updates so far was the EIP-1559 update which happened back in August. One of the main things that was introduced was the fee burn mechanism. Basically, every single fee that is paid for transactions has a base fee that is burned from supply. Essentially, those fees reduce the inflation rate of ETH. The problem with that is what happened a few weeks after the upgrade was released. The burn rate exceeded the emissions which made Ethereum on certain days a deflationary asset. What this basically shows is that Eth has not only high demand but also becomes a rarer asset.

With all of this out of the way, the most interesting thing is what will be happening when the high anticipated proof-of-stake merge will happen. In this event ETH`s Proof-of-Work main chain and Proof-of-Stake beacon chain will merge. This is one step in the roadmap towards ETH 2.0. It will officially see the ETH blockchain transition to a PoS blockchain which will bring all the benefits the users have been waiting for: Scalability, Speed, Decentralization and most importantly low fees. This will not only make Ethereum a lot more usable, but it will also ease some of the criticisms that are often leveled at it.

Not only that, but the impact it will have on the supply might be bigger than expected. After the merge the blockchain will go through a phase called the Triple Halving. Here the block rewards will be cut by a factor of around eight. In other words, this could be compared to an equivalent of three halving events. Now think about the hype that is attached to a Bitcoin halving and consider what will happen if it is three times that. If the supply gets dropped by this rate and the fee burns stay the way they are right now, the deflation could get supercharged.

Future Demand

Sounds very bullish right? So are the big investors thinking as well. The investor demand in the future seems to start rising. Whereas utility demand is driven by people who want to use the network investment demand is coming from those who want to HODL ETH for long term gains. It is no secret right now that institutions are now actively allocating parts of their portfolios towards ETH. This is also mainly to some ESG concerns that are making BTC and other Proof of Work blockchains land on a black list for investors. Because PoS blockchains are considered more environmental friendly this could mean that with the transition to PoS, Ethereum can become the most dominant cryptocurrency around the world.

Conclusion

With all of these indicators around us the future of ETH seems to be as bright as ever. I think we could see a big price jump in ETH even this year. With all of the positive things said, let me also stress some negative sides. Of course nobody can look into the future so nothing is certain. Maybe there will come a very hard winter or some harder regulations that nobody could foresee. Additionally, it is important to mention that the mentioned merge was planned for earlier this year which means that there might be also some delays in this regard as well. Nevertheless, I think that ETH is very close to a insane rally.

What do you think about that? Could we see an ETH worth 8k in this year? It would not surprise me.

Published by ga38jem on
Publish0x|LeoFinance|Steemit|read.cash
On 17th November 2021

Sources:
https://coinmetrics.io/the-ethereum-gas-report/
https://ultrasound.money/
https://blog.ethereum.org/2021/03/24/finalized-no-24/
https://defillama.com/chain/Ethereum
https://dappradar.com/ethereum/marketplaces/opensea
https://www.coindesk.com/business/2021/09/23/institutional-investors-preferring-ether-over-bitcoin-now-jpmorgan/
https://markets.businessinsider.com/news/currencies/ethereum-ether-bitcoin-crypto-defi-nfts-interest-rates-gold-jpmorgan-2021-11
https://markets.businessinsider.com/news/currencies/ethereum-price-outlook-rally-inflation-goldman-sachs-crypto-investing-2021-11