3 Factors Suggest a Rise in Ethereum Price
On-chain data show that Ether whales are accumulating Ethereum (ETH) again. For instance, a wallet address belonging to a popular whale (Metalpha) recently purchased $50M in ETH earlier this month.
Analytics platforms note that another whale withdrew $100M worth of this digital asset from the leading crypto exchange, Gate.io. Then, another whale wallet moved over 10,000 ETH to an unidentified wallet from the ByBit crypto exchange.
Experts believe that Whales’ accumulation of ETH is a good sign for the coin as it could result in a fear of missing out among smaller investors and reduce any selling pressure on the asset, at least in the short term. Another indicator of possible bullishness for the Ether price is the market cap to realized cap (MVRV) band.
When Ethereum drops below this band, it usually suggests buying opportunities. Analysts believe that ETH’s cycles usually repeat themselves in a clear manner.
Hence, they predicted that ether could re-start a strong rally based on historical sentiment till it reaches a price of $10,000 and above. If this happens, there will be a significant change in the coin’s market structure.
A Possible Market Bottom?
Earlier this week, on-chain data showed that many categories of investors sold off a large portion of their ETH coins. Many of them were those who had invested in the coin through ETFs.
However, the latest accumulation by large holders indicates that the coin’s market could have reached its exhaustion level. The value of this cryptocurrency has dropped by 60% since reaching a peak level last December.
In contrast, BTC’s price, which set a new all-time high in January, is down by 22%.
L2 Transaction Needs Exceed Planned Blob Capacity
Meanwhile, a recent report has revealed the need for Ethereum to address its scalability issues to ensure the continued growth of its layer-2 networks. According to the report, the rise in user adoption and transaction throughput in L2 networks would lead to increased costs and sabotage the network’s scaling roadmap as these networks would be competing for limited blob spaces on the network.
Blobs are Ethereum’s way of supporting L2s with low-cost data storage methods. It became effective following the approval of the Ethereum improvement proposal (EIP-4844).
However, the current structure of allocating three blobs for a block would become inadequate in fulfilling future needs. Even though the network’s plan is to allocate six blobs for each block after the Pectra upgrade, experts believe that the sharp growth of the L2 network could exceed available capacity.
Tests show that transaction fees could reach $0.64 for each transaction if there’s a 10x rise in the number of transactions per second across leading L2 networks like Optimism, Base and Arbitrum.
Experts suggest that the network would need to provide at least 33 blobs for each block before transaction fees on L2 networks can drop below $0.02. They believe that if these upgrades are not implemented soon, the network could experience increased congestion.
Such congestions would limit the effectiveness of the L2s’ scaling approach. It is worth noting that Ethereum plans to increase blob capacity with upcoming upgrades like Fusaka and PeerDAS.
Base Highlights Ethereum’s Layer-2 Growth and the Strain on Its Core Infrastructure
Coinbase’s L2 blockchain, Base, is proof of the challenges and opportunities in the current Ethereum network model. After its launch, Base’s user fees have surpassed $106 million and linked 1.9 million ETH, with over 155 million addresses.
Applications built on the Base network continue to record massive activity and user demand based on the $768 million fees Base has generated from all these applications. Base also accounts for about $4.5 million in settlement and blob fees to the Ethereum network’s validators, proof that there’s an interlink between Ethereum’s revenues and L2’s growth.
While Base’s success is proof of the Ethereum network’s constant growth, it also shows the pressure on the L1 network. Without including other L2s, on-chain data shows that Base records an average of 93 transactions per second.
Experts believe that if Ethereum fails to efficiently address the blob space issue, it could lose its position as the leading ecosystem for decentralized applications.
