- As Ethereum gas fees rise, so does the price of transactions on the Ethereum blockchain.
- Non-fungible tokens of lower value could be massively affected by the rising Ethereum gas fees, which could push the NFT market to its limits.
- $ 2 billion worth of Ethereums stored in exchange wallets could belong to whales looking to take profits.
Ethereum’s surge towards its all-time high of $ 4,356.99 in May is interrupted by ongoing consolidation. Almost 600,000 ethers were deposited into Binance, which sparked fears of a sell-off.
Ethereum on-chain activity is falling in response to the rise in gas charges
The popularity of CryptoPunks, a collection of 10,000 faces of humans, aliens, monkeys and zombies developed by the American studio Larva Labs, laid the foundation for the iconic NFT hype in 2021. Recently, the payment giant Visa acquired a CryptoPunk, and demand for the NFT collection skyrocketed.
NFTs take up an ever-increasing share of Ethereum network activity. Despite the London hard fork, the Ethereum blockchain is not fully capable of solving the scalability challenge and congestion on the network is driving up transaction fees (or the price of gas).
A cryptocurrency trader and analyst behind the Twitter account @MoonOverlord commented on rising gas prices and its impact on the non-fungible token ecosystem.
$ ETH gas is rising. If this continues and the price continues to rise, it will wipe the bottom of the NFT market because it will no longer be possible to trade. It will force people to move to other groves and platforms like Topshot, Axie, Sorare etc.
– BIG DOG (@MoonOverlord) August 24, 2021
It should be noted that it may not be practical for merchants to pay high gas fees, NFT marketplace fees, and the cost of the NFT on every single purchase. This is expected to discourage NFT providers from banking on the Ethereum blockchain; at the same time, this could drastically reduce the demand for digital art and collectibles in the medium to low price segment.
NFT and DeFi investor and project advisor @iamDCinvestor believes that the most valuable digital art and collectibles can continue to trade for the same price and that the rise in gas fees will hit the less valuable NFTs the hardest.
I have a theory about this: there is actually an extremely low level of sensitivity at the high end of the market, so the most valuable sets can still be traded and even gain in importance.
but lower value NFTs are hit hard, and here we see how intertwined it is.
– DCinvΞstor (@iamDCinvestor) August 24, 2021
The problem of rising transaction costs on the Ethereum network could be solved if the price of Ether was relatively low compared to its competing blockchains.
As the financial platform Investing.com in the article entitled “Cardano and Solana take a breather: Ethereum whale takes profits
“reported a surge in Ethereum inflows to the exchanges valued at nearly $ 2 billion. On closer inspection, the on-chain data showed that the wallet addresses that deposit Ether into wallets from exchanges such as Binance , possibly belonging to whales looking to make a profit.
An increase in the inflows also means an increase in the Ethereum available for sale in the wallets of the exchange; this increases the selling pressure on the altcoin.
Historically, a surge in inflows on the stock exchanges is associated with a decline in the price of the asset.
Inflow on the stock exchange (ETH).
At the same time, there has been a decline in the number of active addresses in the Ethereum network. Analysts attribute this to the rise in fees as transactions on the Ethereum blockchain become increasingly expensive.
Overall, the increasing selling pressure on the stock exchanges and the declining address activity indicate that traders are taking profits at the current price level. FXStreet analysts have predicted that falling below the $ 3,000 support could have catastrophic consequences for the price of the altcoin.