Ethereum Price Bounces as the Network Prepares to Attract a New & Wider User base
Ether enjoyed some green moves over the weekend, going as high as $1,755 before making its way to $1,650 on Monday. As of writing, ETH/USD is trading around $1,700.
This upward move followed Bitcoin, making some recovery in tandem with the stock market. Besides aligning with wide market appreciation, Ether’s greens could also be attributed to an upcoming significant change to the network.
Over the weekend, Ethereum blockchain developers approved the EIP-1559 that will burn the network fees paid in Ether, creating a positive feedback loop for its price. The proposal will be part of the London hard fork that can come as early as July.
“This is probably one of the biggest milestones we’ve seen recently,” said Eric Turner, director of research at cryptocurrency analytics firm Messari. Up until the EIP 1559 goes into effect, the supply of Ether has been theoretically infinite. “Now, they’re actually controlling inflation on Ethereum,” and “in some cases, you’re looking at negative inflation, so it’s definitely important,” Turner said.
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While scaling Ethereum will lower fees, per user, at the same time, it will “increase the overall userbase by even more, and therefore increase the total fees,” notes Qiao Wang of DeFi Alliance.
This proposal will help attract a new user base by making the platform “easier, faster, and cheaper to use,” explained Wang. Implementing EIP-1559 would mean that only Ether can be used to pay the transaction fees on the network, cementing Ether’s role in the ecosystem.
Tim Beiko, a senior product manager at ConsenSys, also said, going forward, “we’ll gauge demand for the network, and we put that average price as part of the network itself.”
EIP-1559 “fixes a bug in the economics of Ethereum we’ve known about from the start,” Beiko added.
A small bounce in Ether’s price relative to Bitcoin can also in part be attributed to NFTs (non-fungible token) going mainstream.
Traditional media is all over the NFTs, which are being sold for a hefty price. Recently, a publicly available 10-second video clip was sold for $6.6 million.
“At this point, NFTs have made a greater impact than DeFi. Both in terms of cultural impact and news users brought into the wide crypto ecosystem,” said Wang. According to him, it is largely because NFTs are easier than DeFi, from a users’ perspective. “Playing games, collecting items are easier than complex financial games,” he added.