The market falls, the market value of Ethereum rises instead of falling

After Bitcoin (BTC) fell below $60,000 on April 18, the total market value fell from $1.13 trillion to $928 billion in a week. Affected by the downturn of "Coin King", the total market value of encrypted assets has also shrunk from 2.25 trillion US dollars to 1.9 trillion US dollars, evaporating 15%.

During the same period, the total market value of Ethereum (ETH) rose instead of falling, from a peak of US$237.9 billion to a high of US$304.1 billion, and is currently at US$265.7 billion. In the early hours of April 26, BTC fell 23.3% from its all-time high of $64,804, and ETH fell 12.5% ​​from its all-time high of $2,640, almost half of BTC.

According to data, the number of active addresses of ETH reached a new high recently, reaching 771,000.

Under the market waterfall, why is Ethereum so resilient?

While the Ethereum network has been criticized for its high gas fees, developers working to improve network efficiency are still working. On April 15th, Ethereum completed the "Berlin Hard Fork" upgrade, and the "EIP-1559" proposal to reduce the volatility of transaction fees will be implemented in the "London Hard Fork" upgrade in July.

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The number of ETH active addresses hit a new high

The Ethereum network has been busy since April 15th. The "Berlin Hard Fork" has optimized various smart contracts, including improving Gas efficiency, updating virtual machine (EVM) reading codes, and preventing DDOS attacks, etc.

The improvement brought about by the upgrade on the Gas fee is very obvious. Data on April 25 showed that the Ethereum Gas fee dropped to an average of around 50 Gwei per day, a new low since 2021, and reached a peak of 430 Gwei per day this year.

After the gas fee drops, the number of active addresses of ETH is increasing. Active addresses on the ethereum network rose to 771,000, according to cryptocurrency analysis and research firm Coinmetrics. This number surpasses the previous record from January 2018, when there were 735,000 active addresses. By November 2020, it had reached 739,000.

The record number of active addresses in 2018 was triggered by ICO, and in November 2020, the surge of decentralized finance (DeFi) applications on the Ethereum network has brought a market of new active users. OKLink data shows that as of April 26, the total locked value (TVL) of encrypted assets in DeFi applications on Ethereum reached 75.6 billion US dollars.

These favorable changes to the ecological development of Ethereum are reflected in the price market of ETH.

As of 4:30 a.m. on April 26, ETH remained near $2,285. After the encrypted asset market evaporated 15% of its market value in a week, the total market value of ETH increased by 11% to 264.2 billion US dollars, and it once soared to 304.1 billion US dollars on April 23. ETH's 7-day decline was only 2.6%, while BTC fell by 17.6% over the same period.

The market value of ETH rose by 11% in 7 days

Ethereum's trend of bucking the trend and resisting the decline is continuing to grow its popularity.

Recently, Rothschild Investments purchased 265,302 Grayscale Ethereum Trusts for a total value of $4.75 million.

Last Tuesday, three Ethereum ETFs officially started trading on the Toronto Stock Exchange in Canada, namely the Ethereum ETF (ETHH) of the asset management company Purpose Investments, the Ethereum ETF (ETHR) of Evolve, and the Ethereum ETF (ETHR) of CI Global. Ethereum ETF (ETHX).

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"London Hard Fork" Brewing Market Expectations

The performance of ETH rising against the trend and stabilizing seems to bring some hope to investors who have been caught in the recent market plunge, and greater expectations are still on the way.

After the "Berlin Hard Fork" upgrade, the next big move of the Ethereum network will be the "London Hard Fork" upgrade, which is expected to be carried out in July. 1559" proposal.

This proposal introduces the concept of "block elasticity", which can dynamically scale the block size to cope with instantaneous network congestion. The original intention of the proposal is to dynamically adjust the network capacity, but objectively it will bring about structural changes in the existing Gas fee of the Ethereum network, which in turn will have the effect of alleviating network congestion and reducing fees.

Blue Fox Notes believes that "EIP-1559" is essentially a solution to the Ethereum network transaction pricing mechanism. Each block will generate base fees and tips for tipping miners. The base fee for each block is fixed. Once the "EIP-1559" proposal is launched, it will use a formula to adjust the rise or fall of the base fee according to the network congestion; when the network is congested, tips will motivate miners to package users For transactions, you can specify the base fee and the upper limit of tips when trading.

There is also an impact on ETH market liquidity in this change. The proposal stipulates that the base fee of the block will not be given to the miner, but will be destroyed. In this way, the income of Ethereum miners will inevitably be affected, but for ETH holders, the "destruction" mechanism has a potential deflationary effect of ETH, which is also an impact that investors are willing to see, so it has become the market's expectation of ETH. The reason for the "London Hard Fork" upgrade.

However, Abdelhamid Bakhta, one of the authors of the "EIP-1559" proposal, hopes that the upgrade and proposal launch in July can be viewed rationally inside and outside the ecosystem. In an interview with Cointelegraph, he emphasized that reducing the current congestion and high fees is not the purpose of "EIP-1559". More importantly, he wants to introduce the concept of "block elasticity" to double the theoretical maximum capacity of the network.

He explained that transaction fees are a function of supply and demand, and that technically, the average available block space will not increase because the base fee mechanism is designed to tend to reach half of the maximum block size, so this upgrade will not be Ethereum The long-term solution needed to solve its scalability problems. However, on a more optimistic note, as more and more Layer 2 solutions continue to be adopted, all network fees and congestion issues will eventually be resolved.

Regarding miners' dissatisfaction that the next upgrade will reduce the mining reward rate by 50%, Bakhta believes that in the future, when Ethereum finally transitions to the PoS framework, the mining business will definitely end, although this reduction is difficult. Accepted, but the change is inevitable," which is not to say that they (miners) are unaware of the suggestion. The idea was originally published by Vitalik in a July 2018 paper titled "First and First Two-Price Auctions, Improving Transaction Cost Markets."

The idea proposed by Ethereum founder Vitalik two years ago is becoming a reality through the continuous work of ecological workers, and the "London Hard Fork" is almost a certainty. In this round of decline, ETH has not been broken down by the market waterfall, which will be more conducive to the cohesion of ecological consensus.