Ethereum (ETH) Breaks $2,700 from London Fork Boost
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With less than a day remaining for the London hard fork to be implemented, Ethereum (ETH) market prices are having a field day. ETH is up 7.73% in the past day, rising to $2,704.86.
Trading moved to a more active pitch, surpassing BTC trading volumes. ETH activity surpassed $25B in the past day, as all attention moved to its price action and DeFi ecosystem.
Despite expectations that ETH would sink to much lower valuations, for now attention has shifted to the second largest asset by market capitalization. Extreme predictions see more upside to ETH in comparison to BTC prices. After the late June sell-off and a dip to the $1,800 range, ETH is gaining new bullish attitudes with expectations to retest previous levels or reach new highs.
Can ETH Displace BTC
ETH has never taken the spot of BTC, but the latest on-chain activity and the buildup of projects shows the asset has solidified its position. Despite attacks from the BTC community, ETH keeps up the pace, and has sought to make gains in Satoshi terms.
ETH has remained steady above 0.06 BTC, breaking the expectations it would continue sinking. At the same time, BTC market cap dominance has slid to 45.4%, down from 47.2%, as attention shifted to the more active altcoin trading markets.
The passing of the hard fork may deflate the latest ETH rally. But the successful week has opened the door to expectations of $5,000 prices.
ETH Gas Fees Climb Quickly
Using the ETH network once again shows heightened activity may be creating bottlenecks. Using Uniswap, for instance, can cost around $13 on average, though realistically may pose a much higher transaction requirement.
On average, gas fees have not repeated the levels from May 2021, when DeFi was the main reason to use the Ethereum network. However, during minting sessions for NFTs, specific fees to create a collectible and a token may rise to $1,000 even for “free” airdrops.
For now, using protocols may require checking the fees in advance. On average, DeFi protocols may require five times the average gas limit. Regular ETH transactions with a slower propagation time may remain relatively cheap.
Is ETH a Security
The discussion whether ETH tokens fit the definition for being a traded security have continued until now. The US Securities and Exchange Commission for now holds ETH is not a security, though it has persecuted some token-based projects for selling what amounts to unregistered securities.
ETH trading is also geographically distributed, and the verdict of the US SEC may not affect all exchanges.
One of the risks for ETH adoption is the potential for regulators to turn their attention to decentralized exchanges and DeFi projects.
DeFi Returns with Higher ETH Prices
The growing ETH market price is giving a boost to DeFi projects. The upward trend means no dangers of liquidations and an appreciating ETH collateral.
In the past weeks, the total value locked (TVL) in ETH-based projects recovered from a low of around $43B to above $72B. Aave (AAVE) remains the top project, locking in more than 16% of all value, displacing previous leaders Maker and Curve Finance.
DeFi Tokens Outperforming
On the day of the hard fork, the native tokens of leading DeFi protocols outperformed the market with stronger recoveries.
The overall value of DeFi tokens bloated to above $95B, up from a recent dip to $60B during the June sell-off. Most of the value is concentrated in the top 10 tokens, with Uniswap holding the lead at above $13B market cap.
But the DeFi space is highly active, and even new arrivals can make quick gains. The leading crypto lending project AAVE got a boost, adding 17% in the past day to trade above $355. AAVE has successfully bounced off lows under $200, and is midway to its peak around $620.
How the London Fork Will Affect ETH
For now, the market price behavior of ETH shows the upcoming hard fork looks like a bullish event. The worst case scenario has been thrown around for months, suggesting miners may leave the network, leaving it with lowered security. The other potential outcome is the appearance of an alternative chain that supports the old fee rules.
What is certain is that the hard fork will immediately start burning ETH, which will be an open and transparent event.
This, along with deposits to the ETH 2.0 contract, will chip away at the ETH in circulation, boosting scarcity. At the same time, the ETH futures market may diminish as Binance is closing off its leveraged derivative markets for EU-based traders, with the potential to remove risky trades for all accounts.
On August 5, most deposits and withdrawals on exchanges went through rolling temporary stops, and are expected to resume in less than 24 hours.
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