The price of Ethereum may be bullish in the short term, but there are a few factors that may cause the price to be nailed within the current range.
Since Ethereum co-founder Vitalik Buterin gave a speech at the StartmeupHK festival in 2021, the price of Ethereum (ETH) has been declining. In a fireside conversation meeting on May 27, Vitalik stated that the conflict between several internal teams has delayed the migration of the network to the PoS mechanism.
According to Cointelegraph, the “first phase” of introducing scalability through sharding has been postponed to 2022. In addition, the inherent decentralization nature of DeFi may not be entirely conducive to network upgrades, because fragmented processing requires transactions to be run through a relay chain.
We cannot pinpoint the reason for the sharp decline of Ether from historical highs, but the surge in GAS fees has definitely affected investors’ expectations. It not only makes people see the limitations of the network, but also encourages traders to try other networks, such as Binance Smart Chain (BSC) and Polygon’s second-layer solutions.
The figure above shows that the average GAS fee of $45 occurred for an entire month after the Berlin upgrade went live on April 15. The consensus of the Ethereum community is that Berlin will have less impact in the short term, but it paves the way for the EIP-1559 protocol of the London hard fork that is expected on August 4.
This points us to one of the three factors that may have a negative impact on the price of Ethereum in the short term.
London fork postponed
The Ethereum London hard fork is part of the roadmap to the final Eth2 version in 2022. The long-awaited update was originally scheduled to take place on August 4, but it has been postponed.
Miners will be the most affected by the EIP-1159 proposal, which aims to destroy part of the costs incurred on the Ethereum blockchain, thereby reducing their income. In addition, EIP-3554 introduces an incremental difficulty adjustment that encourages migration to the new PoS blockchain.
The delivery record of Ethereum developers also does not give people confidence. If part of the upgrade occurs and the more controversial changes are delayed, the price of Ether may fall, because part of the current rally is based on the hype surrounding the hard fork.
Outflow of miners
This time, the main concern is not technical issues, but social issues. For Ethereum miners, once their source of income will be gradually cut off, then some competitive network benefits will be sooner or later.
Even though most smart contract blockchains are designed for the PoS proof consensus model, some lesser-known projects may change their algorithms to support Ethash mining.
Analysts should not give up the possibility that Binance Smart Chain or Solana can use the extra computing power caused by the outflow of Ethereum miners to implement an additional layer of security. Although this situation is still far away, these trends will undoubtedly put pressure on the price of ether.
The longer it takes for the full implementation of Eth2 and dApps to upgrade the code to support parallel processing and sharding capabilities, the greater the motivation to increase multi-chain support.
Curve and AAVE are the two leading DeFi protocols calculated based on the total locked value, and both add support for blockchains other than Ethereum. At the same time, according to data from DeFi Llama, Polygon holds a $550 million Curve contract, and AAVE has another $1.8 billion.
In the end, the most likely “Ethereum killer” will be the network itself, because the delay in scaling the solution will push users and dApps to switch to other solutions. At the same time, the migration to PoS has opened up space for strengthening competitive blockchains.
Author: MARCEL PECHMAN | Compiler: Maya
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/3-reasons-why-the-price-of-ethereum-may-not-exceed-5000-anytime-soon/
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