Ethereum

Despite Record Break Burn, Why Ethereum Is Facing a Lull In Terms Of Price Action?

Written by: Qadir AK

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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Jan 19, 2022

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The core problem of any true Ethereum fan would be the terrible gas fees. But this misconception could be alleviated if traders start to realize how layer 2 solutions created for the star altcoin would reduce the high gas fees. As fewer users are aware of the same, ETH price failing to take off despite record break token burning. 

Interestingly, a total of 1,556,769 ETH worth $5.9 billion has been burnt since the EIP-1559 upgrade in August. And this is currently the market cap of Ethereum Classic, which is at 32nd position in Coinmarketcap.

Although 3% of the total supply is burnt, the asset is still lacking behind to reach the expectations. The only problem that is ceasing the altcoin’s price action would be scalability and gas fees.

Why Do You Still Pay High Gas Fees, When You Can Avoid It!

Layer 2 solutions for Ethereum intend to reduce the gas fees by approximately 10x by validating a bundle of transactions into a single transaction. This could become an all-in-one scaling strategy for the short, mid, and long-term. 

Presently, less number of users who are aware of L2 solutions. Whilst the majority of the users still have accounts and ENS names on L1, if they start to adopt L2 solutions then ETH price going deflationary is inevitable. 

Ethereum blockchain can possess only possess 15 tps which is already a known thing. But through the L2 solution, users can enjoy approximately 3000 tps. Until the merger happens, layer2 centric transactions could only save traders from paying high gas fees.

Understanding the Ethereum’s Resilience!  

Along with the above facts, if the merger happens by the end of July then the ETH price would remain unstoppable. Why because it would optimally invert Ethereum’s inflation rate from 4.5% to 0.05% thereby allowing price to go deflationary. 

In the current PoW consensus mechanism, miners receive approximately 14,000 ETH per day. With the shift over to more efficient PoS, instead of miners, 1.4k new ETH per day will be issued to validators. Hence, depleting 90% of issuance will obviously uplift the price action along with burn events. 

Collectively, PoS or Layer2 solutions whichever the way, if they quickly manage to achieve resolving the scalability issue, Ethereum will become the biggest thing in cryptoverse.

Especially, roll-ups such as Arbitrum and Optimistic Ethereum which also aims to reduce the gas fees are becoming increasingly popular and recording more transactions day by day. 

In addition, the ecosystem is planning to facilitate 10.5% of APY post the PoS merge. Further, if everyone starts to migrate toward L2, gas usage decreases and Ethereum glitters like never before. 

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Qadir AK

Qadir Ak is the founder of Coinpedia. He has over a decade of experience writing about technology and has been covering the blockchain and cryptocurrency space since 2010. He has also interviewed a few prominent experts within the cryptocurrency space.

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