The Ethereum bubble is just beginning.
- ETH is the top-performing major crypto of 2020.
- Adoption of DeFi has been a major catalyst for ETH price appreciation.
- Ethereum miners are earning more fees per day than Bitcoin miners.
- ETH 2.0 and layer two scaling infrastructure could be the final piece to puzzle for the adoption of Ethereum and DeFi.
Ethereum’s native asset, Ether, has outperformed Bitcoin by over 50% in 2020. With growth drivers in the form of DeFi, EIP 1559, and ETH 2.0, this trend is likely to continue as investors start to price in ETH’s fundamentals.
Ethereum’s Remarkable Fundamentals
Many different pieces are coming together for Ethereum, brewing the perfect storm for the cryptocurrency to continue as one of the top-performing assets in 2020.
ETH led the major cryptocurrencies in terms of performance, recording an 80% return versus BTC’s 30%.
There are a number of factors – current and future – that have contributed to ETH’s dominance.
Blockchain and crypto venture capital fund Pantera Capital believes that ETH and some other altcoins will continue to outperform BTC on and off in 2020.
Further, in 2021, as the market matures, Pantera expects altcoins to capture a larger market share than Bitcoin, implying BTC dominance will fall well below 50%.
Avi Felman, a trader at BlockTower Capital, believes the rise of DeFi has pushed crypto beyond being just sound money.
Soon, even non-DeFi projects on Ethereum could start to gain considerable attention.
DeFi, which is almost entirely built on Ethereum, is growing at an unprecedented rate. Users are rushing to take advantage of new incentives on DeFi, which has congested the network with transactions, sending gas prices soaring despite an increase in the network’s gas limit.
While this has made trading a little less efficient for traders, it has resulted in Ethereum miners being compensated with fees higher than that of Bitcoin miners.
On June 24, Bitcoin miners received $390,000 from fees, while Ethereum miners enjoyed $777,000.
On the topic of fees, EIP-1559 is a pertinent point of discussion that many believe will help ETH capture more value from the Ethereum protocol’s growth. EIP-1559 aims to normalize transaction fees so that it is predictable and not highly volatile. Each transaction on Ethereum would burn a certain amount of ETH.
Finally, with ETH 2.0 scheduled to launch sometime soon and layer two implementations revving up, Ethereum receives the scalability upgrade it needs to not just cater to the current set of users, but to onboard the next wave of adopters too.
In the next few months, ETH’s price can take off if the market is confident that these scalability upgrades and the fee burn proposals are implemented on mainnet.
Given Ethereum’s historical delays with product upgrades, however, the market may not be pricing in various factors that can catapult ETH into a new market cycle.