Ethereum’s price can reach its all-time high faster than Bitcoin. All because of the so-called «liquidity crisis» in the Eth network – a phenomenon that may be a direct consequence of the coin burning mechanism introduced with the help of the London hard fork.
Ki Yong Joo, CEO of analyst firm CryptoQuant, spoke in more detail about the factors behind a potential ETH bull run on Twitter.
Recall that the London update, which was activated on the Ethereum network on August 5, 2021 at block number 12965000, really started the process of burning coins. This was done through the implementation of EIP-1559. Now those ETH that were paid by users as the base commission for the transaction are destroyed. And the more loaded the network, the more ethers are burned.
We checked the latest data: to date, more than 63 thousand ethers have been destroyed on the Eth network, that is, the equivalent of $ 190 million.
The volume of ethers burned after the London update
In the future, this feature will noticeably affect the supply of coins in circulation and the rate of their issue in general. And it is precisely because of this that the cryptocurrency has more growth potential than BTC.
When will Ethereum start to grow?
After the local growth of Bitcoin above 45 thousand dollars, Ethereum also showed good results, gaining a foothold above 3 thousand dollars. In many ways, this event became possible thanks to the general optimism around the successful integration of the London hard fork – this moment is displayed on the chart below.
Day of activation of the London hard fork on the Ethereum chart
Ju is confident that the resulting growth dynamics is more than enough for Ether to outstrip Bitcoin in the race to its all-time high. Here is a quote from an expert in which he shares his attitude to what is happening in the cryptocurrency market. The replica is provided by Cointelegraph.
In the long term, ETH may hit its all-time high before BTC. Compared to Bitcoin, Ethereum’s current market price is closer to its all-time high. The liquidity crisis of Ether is still developing, while the fall in the volume of BTC reserves of cryptocurrency exchanges stopped back in May.
CryptoQuant CEO Ki Yong Joo
We checked the actual data: ETH is indeed closer to its all-time high, but not by much. Today, the difference between these indicators does not exceed half a percent. In particular, BTC is 31.4 percent behind the record price today.
Lagging bitcoin rate from its historical maximum
Ethereum’s corresponding score is 31 percent.
Lagging of the Ethereum rate from its historical maximum
A decrease in the reserve of crypto-exchanges indicates the withdrawal of coins from trading floors to cold wallets for long-term storage. And vice versa: an increase in this metric indicates that market participants bring bitcoins to exchanges for their quick sale. During the last major Bitcoin price correction in May, reserves began to skyrocket, according to sources, but declined from 2.54 million to 2.44 million BTC between July 26 and today . However, it is still higher than in May.
Dynamics of changes in BTC reserves on exchanges against the background of cryptocurrency prices
But Ethereum reserves on exchanges have been declining almost all the time in a linear trend. After hitting a local high of 21.43 million ETH in May, the figure has dropped to 19.25 million ETH by today .
It is important to note that, unlike Bitcoin, withdrawn ethers can not only be kept in a cold wallet, which stores private keys within itself. ETH can also be used across a variety of decentralized finance platforms. They can be borrowed or used to purchase unique NFT tokens. That is, there are much more options for using ethers.
Dynamics of changes in ETH reserves on exchanges against the background of cryptocurrency prices
This is the very “liquidity crisis”, when there are fewer and fewer coins left on the trading floors to sell, while the demand for them continues to grow. In such circumstances, an increase in the value of the asset is the most likely scenario in the long term.
We believe that the expert’s point of view is true. And although Bitcoin is traditionally considered the market leader that leads the rest of the coins, Ethereum now seems more promising.
The rate of issue of ETH has slowed significantly since the start of the flaring, the network is leading in the rate of popularization of trending NFT tokens, and the dominance of the decentralized finance niche on Eth is significantly ahead of all other blockchains combined. This means that it is likely that in the future, large investors will pay more attention to ethers, and not bitcoins with their relatively limited functionality.
