Simon Peters, expert cryptoasset analyst at investment platform eToro posed the following questions: What is affecting bitcoin and Ethereum prices, what is happening to transaction fees, and what is decentralized lending being used for? and shared his views on the matter.
The Prices of Bitcoin and Ethereum
Peters stated, “Bitcoin continues its path around $27,500 despite network issues escalating over the weekend and transaction fees spiking,” to this he added, “The cryptoasset was below $28,000 and peaked below $29,500 greenbacks before falling back and trading below $27,500. Bitcoin has been at or around this level since mid-March.”
Regarding Ethereum, Simon Peters said, “Ether experienced similar volatility last week, starting around $1,800 before soaring to nearly $2,000. It has since retreated back to virtually the same level at which it started. Like Bitcoin, Ether has held steady around $1,800 since March.”
Miners Stir up the Bitcoin Market
Regarding transaction fees, the expert opined, “Bitcoin miners are charging more for processing transactions than for mining new tokens for the first time since 2017, following the introduction of NFT BRC-20 ‘Ordinals’ tokens on the Bitcoin blockchain.”
The eToro analyst explained, “Transaction fees spiked over the weekend and created congestion on the network as subscriptions to Ordinals increased. The problem appears to have had some short-term impact on pricing, especially as some Exchanges have come under pressure from the activity.”
“The fact that transaction fee income is outpacing mining is also a major change. Mining will become less and less profitable as halvings advance. With the supply of Bitcoins permanently limited, mining will end up being much less lucrative than transaction processing, NFT or otherwise,” Peters remarked.
Ethereum Foundation’s Move Threatens Market Selloff
The Ethereum Foundation moved over the past weekend 15,000 Ether tokens to a Kraken escrow address, causing volatility in the market.
The eToro expert explained: “This is something the foundation does periodically. It owns about 0.3% of all Ether and funds its activities by periodically selling some of its holdings. This essentially created a small wave of panic from investors looking to transact before the tokens were liquidated in the market, sending prices down, similar to what happened earlier in 2021.”
Peters further added, “However, the token movement is like making a mountain out of a molehill in market terms. The amount amounts to about $27,508,650, a large sum in nominal terms, but only represents 0.01% of the $221 billion Ether in circulation. In essence, a correction driven by foundation activity that is largely self-feeding.”
MakerDAO launches lending protocol
“MakerDAO’s DeFi project launched a lending and borrowing network called Spark Protocol. The protocol allows users to lend and borrow major cryptoassets such as Ethereum, Staked Ethereum (stETH), Dai, and sDai,” Simon Peters commented.
The eToro analyst remarked, “The activity of lending or borrowing money is a core function of the financial services and banking sectors. Ultimately, if cryptoassets want to challenge TradFi’s dominance, they have to break this aspect of the global financial system.”
He also highlighted, “Lending allows users with assets to earn a return, while borrowing is necessary for households and businesses to afford to build their lives or invest in their businesses.
Therefore, decentralized lending can change the rules of the market game and greatly expand the scope of uses of cryptoassets.”
By Marina Meza
