- As gas fees for Ethereum rise, it becomes expensive to do on the Ethereum blockchain.
- Lower value non-fungible tokens can be hit hard by rising Ethereum gas fees that could clear the bottom of the NFT market.
- $ 2 billion worth of Ethereum deposited into file sharing exchanges could belong to whales looking to take profits.
Ethereum’s rise to its all-time high in May of $ 4,356.99 is interrupted by ongoing consolidation. Almost 600,000 ethers have been deposited with Binance, raising concerns about a sell-off.
Ethereum’s on-chain activity is decreasing in response to the rise in gas fees
The popularity of CryptoPunks, a collection of 10,000 faces of humans, aliens, monkeys and zombies developed by American studio Larva Labs, laid the foundation for the iconic NFT craze of 2021. Recently, payment giant Visa bought a CryptoPunk for 150,000 US dollars, and the demand for the NFT collection skyrocketed.
NFTs have claimed an increasing share of Ethereum’s network activity. Despite the London hard fork, the Ethereum blockchain is not fully equipped to solve 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 handle @MoonOverlord commented on rising gas prices and its impact on the non-fungible token ecosystem.
$ ETH gas goes up, if it stops and gets too high it will clear the bottom of the NFT market because it is impossible to trade. It forces other people to use chains and platforms like Topshot, Axie, Sorare, etc.
– BIG DOG (@MoonOverlord) August 24, 2021
It’s worth noting that traders may find it impossible to pay high gas fees, NFT marketplace fees, and the cost of NFT on every single purchase. This will likely deter NFTs from building on top of the Ethereum blockchain; At the same time, it can drastically reduce the demand for digital art and collectible prices in the mid to low range.
Pseudonymous NFT and DeFi investor and project advisor @iamDCinvestor believes that the most valuable digital art and collectible sets can still be traded for the same price, and the rise in gas charges will hit the lower-valued NFTs the hardest.
I have a theory about this: at the high end of the market there is actually extremely low sensitivity, so the most valuable sets may continue to trade and even gain momentum
but lower value NFTs are hit hard, and here we see how chained it all is
– DCinvΞstor (@iamDCinvestor) August 24, 2021
The challenge of rising transaction costs on the Ethereum network could be solved if the price of Ether were relatively lower compared to its competing blockchains.
Analysts have seen a surge in Ethereum inflow to exchanges worth nearly $ 2 billion. On closer inspection, the data in the chain showed that wallet addresses that deposit the ether into wallets on exchanges like Binance may belong to whales looking to book profits.
An increase in the inflow implies an increase in the Ethereum offered for sale in wallets on the exchange; this drives the selling pressure on the altcoin higher.
In the past, an increase in the inflow of foreign currencies on the stock exchanges was associated with a decrease in the asset value.
Stock exchange inflow (ETH).
At the same time, the active addresses in the Ethereum network decrease. Analysts attribute this to the rise in fees as transactions on the Ethereum blockchain become expensive.
Overall, the increasing selling pressure on the stock exchanges and declining address activity indicate that traders are taking profits at the current price level. FXStreet analysts predicted that falling below the $ 3,000 support could be disastrous for the price of the altcoin.