DeFi Effect: Scaling Debate Begins as Ethereum Fees Reach Two-Year Highs
Ethereum has seen a decentralized finance craze over recent weeks.
Due to innovation, high returns on investments, and other attractive characteristics, DeFi has gone parabolic.
Data from DeFiPulse shows that the value of cryptocurrency locked in blockchain finance applications has reached $1.6 billion. This is
Simultaneously, DeFi-related tokens like Compound’s COMP and Balancer’s BAL have rocketed in value. There was a point earlier this week when COMP was up 1,000% from last week’s launch price of ~$30.
But this craze has come at a cost: high Ethereum transaction fees. Really high transaction fees.
And this cost is starting to get on some users’ nerves.
The DeFi craze has had quite an effect on Ethereum’s usage and adoption.
As reported by NewsBTC, blockchain analytics firm Santiment has found that Ethereum’s network growth is reaching yearly highs. The firm specifically cited the number of new BTC addresses being created, which “just crossed above 100,000 again yesterday.”
“Ethereum’s network growth metric has rapidly been on the rise since the beginning of 2020, creating 237% more addresses yesterday than it did on Jan 1, 2020 (and ~+200% accounting for rolling averages now vs. then).”
This strong on-chain usage has coincided with a spike in fees.
EthGasStation reported on Wednesday that the cost of gas on Ethereum reached ~50 Gwei.
That coincides with around $0.25 for a simple transfer of ETH. Though at 50 Gwei, it costs though dozens of dollars for interactions with smart contracts.
As Head of Business Development at Kraken’s futures division wrote on the fees:
“I have spent $14 on ETH gas fees to transfer/lock my $15 into @CurveFinance and I’m earning a princely $0.079 in weekly $SNX rewards. I’ll break even in just 177 short weeks! (not including gas to close contracts.”
My yield farming is off to a great start.
I have spent $14 on ETH gas fees to transfer/lock my $15 into @CurveFinance and I’m earning a princely $0.079 in weekly $SNX rewards.
I’ll break even in just 177 short weeks! (not including gas to close contracts) 🚀🌕
— kevin beardsley (@kevinhbeardsley) June 25, 2020
Transaction fees are so high that Coin Metrics data shows that the median fee on Ethereum has reached a nearly two-year high.
These highs fees aren’t good for adoption.
They crowd out the retail user from leveraging some of the best applications Ethereum has to offer. If using an attractive application costs $10 each time and the user has $200 in ETH, what’s the point?
The topic of scaling has once again entered the fray in response to this trend. Joseph Todaro of BlockTown Capital wrote:
“If fees move higher or even maintain this level, I expect $ETH competitors focused on scalability to see increased attention.”
Sasha Fleyshman, a trader at crypto fund Arca, recently wrote that “scaling [is] necessary for growth — this is a stress test.”
There are a few solutions coming down the pike.
The most notable of these being Ethereum 2.0, which will revamp the way in which the entire blockchain works. It is expected to reduce transaction times while also increasing output to hundreds, maybe thousands of transactions per second.
Ethereum Could Dive Below $225 Unless It Surges Past $235
Ethereum is currently correcting losses from the $228 low against the US Dollar. ETH must climb above the $235 resistance to start a fresh increase in the near term.
After a strong decline below $235, Ethereum found support near the $228 level against the US Dollar. ETH price started an upside correction above the $230 level, but it is well below the 100 hourly simple moving average.
There was a break above the $232 level, plus the 23.6% Fib retracement level of the downward move from the $250 high to $228 low. However, the price is struggling to clear the $235 resistance (a multi-touch zone).
Ethereum price testing $230. Source: TradingView.com
The 100 hourly SMA is also near the $235 level to act as a resistance. It seems like there is a short-term declining channel forming with support near $230 on the hourly chart of ETH/USD. If the pair fails to stay above the channel support at $230, it could resume its decline.
The next support is near the $228 level, below which ether price might test the $225 support. Any further losses may perhaps spark a sharp decline below the $220 level in the near term.
The first major hurdle for Ethereum is near the $235 level. If there is an upside break above $235, the price could test the 50% Fib retracement level of the downward move from the $250 high to $228 low at $238.
If the bulls gain traction above the $235 and $238 resistance levels, ether might continue to rise. The next resistance is at $240, above which the price is likely to retest the $250 barrier.
Hourly MACD – The MACD for ETH/USD is moving back into the bearish zone.
Hourly RSI – The RSI for ETH/USD is now well below the 40 level, with a bearish angle.
Major Support Level – $225
Major Resistance Level – $235
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Ethereum and XRP prices drop as Bitcoin falls to $9,000 lows
Bitcoin slumped to lows of $8,980 on Wednesday, the decline dragging the rest of the market lower
The cryptocurrency market fell into a sell-off to mirror the stock market slump as recovery hopes faded on news of an upsurge in coronavirus cases in the US. As of writing, the majority of the cryptocurrency market is in red, with prices likely to dip further if buyers fall away to more selling pressure.
ETH/USD has dropped from highs of $249 to lows of $230 on the day, with the second-largest cryptocurrency seeing its value reduced by 4.79%.
As of press time, Ether bulls are looking for a rebound to higher levels. If the ETH/USD recovers above immediate resistance at $233, a short term uptrend might face seller rejection at $240.
On the 4-hour chart, Ethereum’s price is trading below the moving averages. If prices stay below the 50 SMA and 100 SMA, and the former continues to cross under, increased selling pressure will likely push ETH/USD prices lower.
Bulls need to clear $233 and $235 to establish an upper hand. An upside is forming given the RSI is turning positive, though it remains in oversold territory at 44.6 on the 4-hour timeframe. The MACD is also in the negative zone but is moving towards the midline.
Ripple’s price broke below $0.1800 on the day to $0.1797, before a slight upside pushed it back to $0.1833. The XRP/USD pair has traded at a high of $0.1890, but with bears hovering, prices below intraday lows cannot be discounted.
The XRP/USD pair broke the lower limit of its descending triangle, so buyers must now recover above it to avoid a slip to support levels at the .5 Fibo of $0.175. Failure at this level opens up the possibility of $0.16. The pair currently exchanges hands at $0.1835, which is currently near the bottom of the triangle.
For the bulls, resistance is expected at the 50 SMA and 100 SMA (on the daily charts) at $0.1924 and $0.1983 respectively and at $0.20 (100-day EMA).
The S&P 500 has declined by 2.59%, a suggestion that renewed restrictions in New York and other US states — alongside a bleak recession forecast by the International Monetary Fund (IMF) — could see stocks slide further.
The crypto market’s recent increased correlation with stocks might mean similar slumps in the short term. In the crypto market, yesterday’s Bitcoin sell-off was replicated among most of the top altcoins. Ethereum, Ripple and Bitcoin Cash have also experienced significant price drops.
In April, the IMF projected the global economy would shrink by 3%. However, its latest forecast revises the shrink to 4.9% — dampening market outlook as many hoped for a quicker turnaround from the coronavirus-induced global recession.
UAE Family offices invest in W3BCloud Ethereum Blockchain platform
W3BCLOUD, a joint venture between Advanced Micro Devices and ConsenSys has completed its initial close of $20.5M in convertible notes from Advanced Micro Devices (NASDAQ: AMD) and ConsenSys, along with several family offices in the United Arab Emirates. With this first round of funding, W3BCLOUD will ramp and operate its first Ethereum blockchain data centers. W3BCLOUD will expand its network of decentralized data centers across the globe as more funding is raised. “
Ethereum is emerging as the programmable blockchain of choice for decentralized finance (DeFi) and United States Dollar-pegged stablecoins. The economic dislocation of 2020 coupled with the global dollar shortage sparked a significant increase in dollar-backed stablecoins transactions on the Ethereum blockchain.
“The trustless, permissionless and decentralized economy requires robust and dedicated data centers to scale. W3BCLOUD brings together the pre-eminent GPU manufacturer and the leading blockchain developer to build the compute infrastructure for the blockchain economy,” said Co-Founder and CEO Sami Issa.
“W3BCLOUD is building the next generation decentralized compute, storage and bandwidth for the planet,” said Ethereum Co-Creator and ConsenSys Founder, Joseph Lubin. “Parallel and Distributed Computing focused on blockchain use case s is a fast-growing segment of the industry. I am very excited to see W3BCLOUD power up their first GPU-centric data center focused on blockchain as they work to ramp aggressively across multiple geographies throughout 2020,” says Jörg Roskowetz, Head of Blockchain Business Unit, AMD.
Author: Source: Web3Cloud press release