The Ethereum Improvement Proposal 1559 (EIP 1559) upgrade draws investor attention over their usability, as it addresses transaction fee problems.
The Ethereum network upgrade has received approval. By an upgrade to its network, the number of ether tokens in circulation will reduce. It will bring a tremendous surge in prices to the world’s second-largest cryptocurrency say, experts. Ether has gained a lot over the past twelve months, and the burning of ether will increase prices even further, say experts. The fall in the supply of ether tokens will create a higher price for ether.
In 2021, the value of ether has gone up by more than 130%. The second-largest cryptocurrency has outperformed bitcoin with the sales of non-fungible tokens, and experts predict a higher demand for ether. Investors show enthusiasm for DeFi, which draws demand from retail and institutional users.
EIP 1559 Upgrade to “Burn” Ether
The EIP 1559 upgrade to Ether tokens will bring a scarcity to ether tokens (ETH), bringing upward pressure to prices. Blockchain developers have approved the proposal to burn a small amount of ether when “gas fees” are paid on a transaction. The proposal to upgrade ether tokens will be introduced by July or August of this year. By burning ether tokens, it would make the asset scarce, which would increase its prices.
Once the upgrade is made, the Ethereum network fees will not be erratic, making it easier for users on the network. Users on the ETHGasStation can determine their transaction fee at a given time.
The burning of ether tokens will reduce the number outstanding, limiting the number in circulation. With an increasing number of cryptocurrency users, it will raise prices sharply. The change to the Ethereum network will make it more eco-friendly, and transactions will become easier. When the number of ether tokens is lower in circulation, it is expected to bring in explosive growth.
However, Ethereum miners have raised protests on the burning of ether tokens as it would affect their profitability, and it is keeping ether prices away from its psychological resistance at $2,000. Ethereum has been trading below $2,000 levels, reversing from its life highs. Users now wait for it to move past this crucial resistance level, as it is a battle between the bulls and the bears at this level. On the lower side, $1,800 is strong support to the ETH value.
Transaction fees have been made on the auction process, which has kept users confused over their gas fees. Once things are automated, it will be easier for users, say experts. The network usage and volume will determine the fee. The automated network will provide a basefee, to determine the market rate.
The “gas fee” was paid to the miner to get the transaction in the block and was reduced from the user’s overall income. But under the new upgrade, the gas fee will be sent directly to the network as a “basefee”. The high gas fee had made users move away from the Ethereum Network and seek cheaper and faster alternatives for their transactions. The problem has been addressed by the upgrade.
Ether touched a high of $2,000 in February, and prices have come down in March. In 2018, it went up to $1,400 but later dipped lower to below $100 in the same year. Non-fungible token sales have increased, and it may increase the price of ether as well, say, experts.
Ether’s prices a year ago were around $200, and it has increased 750% within a year. Bitcoin prices have increased 530% year-on-year.
Bitcoin is trading just lower than its lifetime high at 58,600. The world’s largest crypto is trading above the $50,000 level for a long duration. Ethereum, which went to a life high at $2,040, is also trading above $1,800. The stimulus package in the US has helped to bring a surge in cryptocurrencies. Ether was introduced in 2015 and has become a strong rival to Bitcoin in terms of market capitalization.
Cryptocurrencies like bitcoin and ether have seen a sharp surge in prices in 2021. Experts warn investors of a sudden dip in prices, as they are already priced high.
The infinite number of ether on the Ethereum network may bring in inflation on the network, warn experts, and it has raised concern in the crypto world.
Treasury Yields and Cryptocurrency Prices
Cryptocurrency prices have surged though Treasury yields are increasing. The US dollar is strengthening, and it may negatively affect the cryptocurrency prices say, experts. The US 10-year bond yields are moving towards the target at 1.6%. The US stock markets are on a decline with rising bond yields as it would bring in a tight monetary policy from the Federal Reserve. Previously, the crypto market moved inversely to the increasing bond yield, but now bitcoin and other cryptos are surging along with the Treasury yields.