Ethereum Hits Record High and there's 3 reasons why
Ethereum Hits New All Time High
Yesterday, Ethereum breached all time high at $3,400, pushing the second largest cryptocurrency's market cap to more than $320 billion with more than 300% rally this year. Leading crypto-commentator Mark Cuban compares today’s blockchain to “the early days of the Internet.”
In Singular’s view, ether’s price has broken out for a number of reasons, among them the following:
Strong and Rising Institutional Interest
This week, Canadian digital asset manager 3iQ Corp and investment firm CoinShares has launched four new Ether ETFs, now trading on the Toronto Stock Exchange (TSX). This allows institutions to easily trade and invest as demand for crypto exposure increases beyond bitcoin. Also, companies like European Investment Bank and Visa, which is backing Singular have validated Ethereum blockchain by announcing issuance and settlement use cases, respectively.
During the last two weeks Four Ether ETFs launched on the Toronto Stock Exchange, making it easy for institutions to gain access as demand for crypto exposure broadens beyond bitcoin. In addition, institutions and companies like the European Investment Bank and Visa have validated the Ethereum blockchain by announcing issuance and settlement use cases, respectively.
Strong On-Chain Signals:
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.
Imminent Protocol Upgrades:
Ethereum historically priced transaction fees using a simple auction mechanism, where users send transactions with bids ("gasprices") and miners choose transactions with the highest bids, and transactions that get included pay the bid that they specify. This leads to several large sources of inefficiency:
Slated to go live in July, Ethereum Improvement Proposal (EIP) 1559 will change Ethereum's transaction fee model significantly. Aiming to lower the volatility of Ethereum’s fees, EIP-1559 introduces a mechanism to burn some transaction fees, detracting from circulating supply and introducing deflation to the Ethereum ecosystem. The impact on ether’s price could be like that associated with a Bitcoin halving event.
Notable are the risks associated with these positive developments. DeFi applications frequently involve significant leverage which, given interoperability within the Ethereum blockchain, might compound the leverage associated with other products. In the event of a downward spiral in ether’s price, the losses associated with deleveraging could be significant.
Additionally, EIP-1559 could become a contentious upgrade, as miners will bear the brunt of fees burned. A miner revolt could impede the progress of the EIP-1559 upgrade.
Yesterday, Ethereum breached all time high at $3,400, pushing the second largest cryptocurrency's market cap to more than $320 billion with more than 300% rally this year. Leading crypto-commentator Mark Cuban compares today’s blockchain to “the early days of the Internet.”
In Singular’s view, ether’s price has broken out for a number of reasons, among them the following:
Strong and Rising Institutional Interest
This week, Canadian digital asset manager 3iQ Corp and investment firm CoinShares has launched four new Ether ETFs, now trading on the Toronto Stock Exchange (TSX). This allows institutions to easily trade and invest as demand for crypto exposure increases beyond bitcoin. Also, companies like European Investment Bank and Visa, which is backing Singular have validated Ethereum blockchain by announcing issuance and settlement use cases, respectively.
During the last two weeks Four Ether ETFs launched on the Toronto Stock Exchange, making it easy for institutions to gain access as demand for crypto exposure broadens beyond bitcoin. In addition, institutions and companies like the European Investment Bank and Visa have validated the Ethereum blockchain by announcing issuance and settlement use cases, respectively.
Strong On-Chain Signals:
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.
Imminent Protocol Upgrades:
Ethereum historically priced transaction fees using a simple auction mechanism, where users send transactions with bids ("gasprices") and miners choose transactions with the highest bids, and transactions that get included pay the bid that they specify. This leads to several large sources of inefficiency:
Slated to go live in July, Ethereum Improvement Proposal (EIP) 1559 will change Ethereum's transaction fee model significantly. Aiming to lower the volatility of Ethereum’s fees, EIP-1559 introduces a mechanism to burn some transaction fees, detracting from circulating supply and introducing deflation to the Ethereum ecosystem. The impact on ether’s price could be like that associated with a Bitcoin halving event.
Notable are the risks associated with these positive developments. DeFi applications frequently involve significant leverage which, given interoperability within the Ethereum blockchain, might compound the leverage associated with other products. In the event of a downward spiral in ether’s price, the losses associated with deleveraging could be significant.
Additionally, EIP-1559 could become a contentious upgrade, as miners will bear the brunt of fees burned. A miner revolt could impede the progress of the EIP-1559 upgrade.
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