- Ethereum's current price action is trading at a 46% discount off its peak.
- It is maintaining share in popular NFT and DeFi arenas against supposed "Ethereum killers."
- Network upgrades are continuing smoothly as Ethereum works to move to a more eco-friendly operating model.
- It set a record in January of removing more than $1 billion worth of Ethereum from circulation in its ongoing effort to improve its deflationary benefits.
The second-largest crypto by market capitalization continues to quietly build its case for a potential breakout this year.
Ethereum (ETH) is the second-largest coin by market cap, which is more than $314 billion as of this writing. In recent months there has been a lot of talk and media coverage of various cryptocurrencies that have been dubbed "Ethereum killers," regarding top players within the smart contract space of crypto.
Those "killers" are collectively supposed to beat ETH because they can handle more transactions per second than the Ethereum network, and at a lower processing fee than the current average Ethereum cost of about $30 per transaction.
However, rumors of Ethereum's demise are exaggerated, and ETH could be a surprise breakout this year.
Ethereum killers are not quite as deadly as thought
The top cryptos charged with displacing ETH tend to be Cardano, Solana, EOS, and Polkadot. However, each of these projects has its own respective issues. Cardano had recent upgrade problems that prevented Coinbase trading and haven't been completely fixed. Solana's recent popularity has caused several network outages and many irate users. Polkadot's interest-generating staking feature is reportedly risky, expensive, and driving users away. Meanwhile EOS seems to have been leap-frogged by competitors.
While Ethereum is trading at 46% off its peak, each of the aforementioned projects are doing much worse respectively according to CoinMarketCap, at the time of writing: Solana down 62%; Cardano down 65%; Polkadot down 66%; and EOS down a whopping 90%. So, the competitive threat to Ethereum's smart contract dominance is greatly diluted right now.
Ethereum transaction fees are trending down
As of two weeks ago, Ethereum's transaction fees are down 35% as developers continue to upgrade the network under its ETH2.0 development plan. That plan will boost transactions per second to more than 100,000, which is intended to further reduce transaction costs and settlement delays.
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Ethereum continues to reduce active coin supply to boost value
According to Ethereum tracking website, UltraSound.money, a total of $1.079 billion of Ethereum (ETH) fees were burned during January -- setting a single month record. A "fee burn" is an automated "self-destruct" mechanism which removes from the circulating supply of coins a certain percentage of ETH. These fees were previously used to pay ETH miners as reward for their "proof-of-work" protocol as they validated transactions on the Ethereum blockchain.
The fee burn started Aug. 5, 2021 as a key first step toward upgrading the Ethereum network to a more efficient "proof-of-stake" consensus model, following the activation of EIP-1559. The burn feature is an intentional effort to reduce the overall circulating supply of Ethereum as a way to make that particular coin increasingly valuable, using basic supply and demand principles.
Through the end of last year, the project had removed more than 1.5 million ETH from circulation -- the equivalent of $4.5 billion U.S. dollars.
Ethereum is the backbone of popular NFT and DeFi activity
It's worth noting that the more than $1 billion in burned Ethereum last month was totally transactional gas fees, which means a lot of transactions took place. The overwhelming majority of those transactions took place on leading NFT marketplace OpenSea. OpenSea set a new single month revenue record in January of more than $5 billion in NFT transactions -- most of which occurred on the Ethereum network.
The OpenSea revenue record reinforces the fact that Ethereum is still the primary network for decentralized finance (DeFi) and non-fungible token (NFT) exchanges and transactions. DeFi currently has $100 billion in locked assets on the ETH blockchain, with more pouring into this automated banking system. And NFTs continue their explosive growth with all-time sales of $20.8 billion according to nonfungible.com as of this writing.
Could Ethereum hit $10,000 this year?
The ETH project is well positioned to continue to benefit from these trends this year. It's currently trading at $2,635, a 46% discount off its all-time high, and it could double or triple that price this year. Last year, it had a 450% return, so it's certainly possible given its use cases and positive prospects. However, hitting $10 thousand per coin is unlikely given the current macro conditions within the space and overhang of possible crypto regulation.
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Tor Constantino owns Ethereum and Cardano.
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