The cryptocurrency of the Ethereum network had not reached this price and market capitalization since January 2018. The increase in US dollars of the price of ETH causes concern about the value of fees.
The price of Ether (ETH) exceeded USD 1,100 for the first time since 2018, approaching the all-time high (USD 1,300) that it had reached two years ago.
Private users seem to have halted trading due to high transaction fee prices. The price of Ether reached USD 1,138 but fell back to stabilize at USD 1,000, according to data from CoinMarketCap. That may have occurred due to a halt in investments to wait for lower fees.
Ether not only approached its highest all-time price, but it also reached a capitalization above USD 100 billion for the third time in its history. These are levels not seen since January 2018 when ETH marked USD 1,300 in price and USD 120 billion in total market capitalization.
Cryptocurrency market data portal CoinMarketCap indicates that Ether’s capitalization recently reached USD 121 billion, achieving dominance close to 13% of the total cryptocurrency market. In that way, Ether becomes the second-largest cryptocurrency on the market, only after Bitcoin, which encompasses 68%.
However, the price of Ethereum has moved away from that of Bitcoin to such an extent that this is one of the moments where this relationship has become most uneven, similar to that of the initial years of the project. In June 2017, it was possible to buy 1 ETH for 0.1 BTC. Now when BTC exceeds USD 30,000, it is possible to buy 1 ETH for 0.03 BTC.
Increased Fees Raise Doubts about the Future of Ethereum
This price rally and the demand to use the network led the transaction fees to soar.
Ethereum’s fees stood at about 568 Gwei or USD 12 for confirmed transactions within a standard time frame, according to Larry Cermak, a researcher for The Block and an investor in DeFi.
Cermak refers to a transaction of more than 5 ETH, for which it was necessary to pay the equivalent of more than USD 100. However, the high prices make smaller transactions impossible, leaving out retail investors.
According to data from Etherscan, fee prices have already fallen, which may contribute to the increase in the price of Ethereum over 24 hours, depending on the activity of traders on both ETH exchanges and DeFi platforms.
DeFi platforms such as Uniswap contribute to increasing the network’s average fees since these contract transactions are often more expensive than Ethereum on-chain transactions. Uniswap is the Ethereum contract that generates the most fees, taking in 31,700 ETH in fees in the last month, according to EthGasStation.
In August 2020, Ethereum reached its all-time high in fees spent. According to data from the Blockchair portal, the average reached 0.026 ETH per transaction. The same source indicates that the fees have a current average of 0.018 ETH per transaction.
If the price of Ethereum continues to rise, the value equivalent to fees will also do so. For that reason, many wonder if this situation is a barrier to seeing the cryptocurrency break new barriers in its market.
Due to this, developers are keeping busy and are possibly considering the implementation of several practical solutions by 2021. That is the case of the proposal EIP-1559, which proposes to burn part of the fees and handle the calculation of these more efficiently.
Vitalik Buterin and the other developers in the community support the proposal, aiming to implement it as a prerequisite to the Ethereum 2.0 launch. However, miners do not agree with the idea of implementing EIP-1559, threatening to leave the network if this occurs.
By Alexander Salazar