Ethereum’s selling pressure is expected to be lower than initially feared after the recent network upgrade, according to blockchain analytics firm CryptoQuant. This development may significantly impact investor sentiment and could potentially lead to increased adoption and value for Ethereum.
The Ethereum network underwent a significant upgrade on June 5th, 2021, with the implementation of the much-anticipated London hard fork. The upgrade consists of multiple Ethereum Improvement Proposals (EIPs), with the most significant one being the EIP-1559. As part of the London upgrade, the EIP-1559 aims to improve the current congestion and high gas fees that have been plaguing the network, making it more scalable and user-friendly. The introduction of EIP-1559 also brings about a change to Ethereum’s monetary policy – a deflationary mechanism that involves burning Ether (ETH) transaction fees instead of awarding them to miners.
CryptoQuant, which provides data-driven insights into the crypto market, recently shared its analysis of the impact of the London hard fork on Ethereum’s long-term selling pressure. According to their research, the selling pressure will reduce after the successful implementation of the EIP-1559, helping increase investor confidence and ETH’s overall value.
There are a few reasons why the selling pressure is expected to reduce after the London hard fork. First, the implementation of the EIP-1559 deflationary mechanism will significantly impact the supply dynamics for Ethereum. By burning some of the transaction fees, Ethereum’s overall circulation supply will reduce over time. Fewer tokens available in the market may lead to increased demand and subsequently higher prices, alleviating some of the selling pressure on the asset.
Second, the Shanghai upgrade, which was the first phase in Ethereum’s transition to its new consensus algorithm, Eth2 (Proof of Stake), will further increase value and stability for the network. The transition from the existing consensus mechanism, Proof of Work (PoW), to Eth2 will enable Ethereum to handle more transactions per second, improve scalability, and decrease energy consumption in the process. As investors recognize the improved efficiency of the Ethereum network, they may become more confident in the long-term potential of Ethereum, resulting in a reduction of selling pressure.
Additionally, Ethereum’s previous hard fork, Berlin, also had a positive impact on the asset’s value, lending credibility to the belief that the most recent upgrade will follow suit. The Berlin hard fork, implemented in April 2021, focused on improving gas efficiency, alleviating some congestion on the network, and reducing gas costs for specific types of transactions. Following the Berlin upgrade, Ethereum experienced a significant surge in price and user adoption, demonstrating the positive correlation between these hard forks and the asset’s performance.
One more factor contributing to lower Ethereum selling pressure after the London hard fork is the growing popularity and development of Decentralized Finance (DeFi) and Non-Fungible Tokens (NFTs) on the Ethereum platform. The increasing adoption and success of DeFi projects, coupled with the high demand for NFTs, have led to a significant increase in transaction volume on the Ethereum network. The successful implementation of EIP-1559, which aims to address these high transaction volumes and associated fees, will make Ethereum more attractive to both retail investors and institutions, supporting the asset’s growth and helping to reduce selling pressure.
It is worth noting that, while Ethereum’s selling pressure is expected to reduce after the London hard fork, no investment is without risk. Unexpected developments in the market or the Ethereum network, such as security vulnerabilities, hacks, or regulatory changes, could dramatically impact the asset’s value and selling pressure. However, the current outlook for Ethereum based on the recent upgrade and industry trends is positive.
In conclusion, the successful implementation of the London hard fork and the much-anticipated EIP-1559 will likely lead to a reduction in Ethereum’s selling pressure. Factors such as the upgrade’s deflationary mechanism, Ethereum’s transition to the Eth2 consensus algorithm, the growing adoption of DeFi and NFTs, and the established positive impact of previous hard forks on Ethereum’s value are expected to contribute to this reduction. While uncertainties in the market and unexpected network developments could affect the asset’s performance, the overall outlook for Ethereum remains favorable for investors with a long-term perspective.