As a seasoned crypto investor with over a decade of experience in this volatile market, I must admit that Q3 of 2024 has been a rollercoaster ride. The landscape, marked by low on-chain fees and Bitcoin’s dominance, has left me questioning the future of Ethereum.
In simpler terms, it appears that the cryptocurrency market is facing a tough terrain. This is characterized by relatively low transaction costs, an increase in Bitcoin‘s influence, and Ethereum grappling with issues of inflation and poor performance.
The essence of Ethereum (ETH) is changing since it transitions from a deflationary approach to an inflationary one, sparking questions about its future function within the crypto sphere due to the emergence of layer 2 solutions and Bitcoin’s (BTC) growing influence.
— Lucas (@LucasOutumuro) October 4, 2024
According to a piece published by X on October 4th, Lucas Outumuro from IntoTheBlock’s research team pointed out that while on-chain fees have experienced a minor uptick in September, Ethereum is still struggling with significant fee reductions that have negatively impacted its overall performance.
Although fees saw a slight increase in September, Ethereum’s overall downward trend in fees is a significant factor that has contributed to ETH‘s poor performance in the market. This is because the market seems to be contradicting the idea that ETH functions as a currency.
Lucas Outumuro
As a researcher, I’ve observed an upward trend in Bitcoin’s market dominance, peaking at its highest level since April 2021, despite the relatively stable price during the quarter. Simultaneously, Ethereum and alternative coins have been hitting new yearly lows. Interestingly, Bitcoin’s transaction fees plunged by a staggering 86% within this period, indicating a market that seems unphased by this decrease.
The difference in the prices of Bitcoin (BTC) and Ethereum (ETH), despite a drop in transaction fees for both, seems to indicate that one is being perceived as a form of currency while the other may be viewed as more linked to its revenue streams.
Lucas Outumuro
The implementation of Dencun update, featuring EIP-4844, significantly affected Ethereum’s economy. While it boosted layer 2 transaction volumes, mainnet fees dropped to record lows, causing unease about Ethereum’s deflationary storyline. As fewer fees are burned now, more ETH is being created again, as Outumuro noted, contrasting this with the Ethereum community’s previous focus on a deflationary path.
Apart from this, the ETH/BTC ratio has dropped approximately 30% since the Dencun update, suggesting a “self-doubt” phase for Ethereum as per Outumuro. Currently, Ethereum is being traded at $2,390, which is over 50% lower than its peak price from three years ago.
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2024-10-04 17:06