Ether, the native token of the Ethereum network, has exhibited a noteworthy 5.5% surge since Dec. 27, with the ambition of surpassing the formidable $2,400 resistance level. Investors are delving into the driving factors propelling Ether’s price and assessing their enduring significance in the cryptocurrency landscape.
- 19-Month High:
The recent intraday zenith of $2,446 on Dec. 28 marks a peak not witnessed in over 19 months. This substantial increase occurred concurrently with the broader cryptocurrency market capitalization remaining stable at $1.68 trillion, hinting at Ether’s potential to sustain a bullish trajectory towards the coveted $2,500 mark. However, a potential hurdle looms as the average transaction fee exceeds $5, posing a potential burden for decentralised application (Dapp) users.
- Competitor Narratives:
Despite prevailing narratives suggesting Ethereum’s shortcomings, particularly in scaling and privacy solutions at the base layer, a comprehensive analysis considers the undeniable success of Ethereum layer-2 blockchains and the dominance of the Ethereum Virtual Machine (EVM). Notably, Ethereum’s Total Value Locked (TVL) stands at an impressive $29.6 billion, dwarfing BNB Chain’s $3.6 billion TVL and Solana’s $1.4 billion, as per DefiLlama data.
- Layer-1 Dominance and Activity Growth:
Ethereum’s absolute layer-1 dominance is reinforced by a robust 38% growth in volumes over the past 7 days. This places Ethereum ahead of BNB Chain and Solana, distancing itself with notable highlights such as Uniswap’s $20 billion volume, Balancer’s $9.4 billion, and Cowswap’s $0.9 billion. In contrast, BNB Chain’s leading application, PancakeSwap, garnered $4.2 billion during the same period.
- Layer-2 Scaling Success:
When considering Ethereum’s layer-2 solutions, the ecosystem emerges as a frontrunner, surpassing any competitor in terms of active addresses engaged with DApps. Notable contributors include the established Polygon network and the privacy-focused zkSync Era, propelling the aggregate Ethereum rollups’ unique active addresses (UAW) to an impressive 2 million in just 7 days. Moreover, zkSync Era’s imminent token launch is anticipated to escalate demand for its network use.
- Research Boost and Upcoming Upgrade:
Research by Ethereum co-founder Vitalik Buterin, published on Dec. 28, proposes a methodology to alleviate the load on validators, theoretically reducing required signatures by 70% and enhancing quantum resistance. The proposed solutions range from decentralised staking pools to a “light” staking method and a rotation between accountable committees. Additionally, Ethereum’s forthcoming upgrade, known as Cancun, is scheduled for testing commencing on Jan. 17. This upgrade aims to lower transaction fees and introduces novel features for bridges and staking pools. Notably, Ethereum Improvement Proposal (EIP) 4844, or “proto-danksharding,” is set to enhance rollup networks’ efficiency by temporarily storing transaction data in a new format called “blobs,” significantly reducing layer-2 transaction fees.
In conclusion, Ether’s recent rally is not solely a consequence of market dynamics but rather a culmination of increased network and ecosystem utilisation, dominance in terms of DApps deposits, and anticipations of further improvements stemming from upcoming upgrades. These transformative changes are likely to solidify Ethereum’s leadership in smart contract processing and staking mechanisms, positioning it as a cornerstone in the ever-evolving cryptocurrency landscape.