Ethereum Miners Threaten to Disrupt the Network, But Tensions Eased
Like a rising tide that lifts all boats, the global recognition that Bitcoin achieved throughout March also helped Ethereum surge. The second-largest cryptocurrency by market capitalization rose from a monthly open of $1,420 to close the first quarter of the year at a high of $1,909, according to CEX.IO’s exchange rate. ETH investors generated a monthly profit of nearly 35%.
Ether kicked off the month on news that Amazon Managed Blockchain added support for the smart contracts blockchain, allowing users to set up Ethereum nodes and join the network via Amazon’s blockchain service.
Although the news was well-received by software developers, a proposal to improve Ethereum transaction costs took center stage.
Ether’s core developers agreed to add the blockchain’s crucial EIP-1559 to the London fork in July. The idea behind the improvement proposals was to burn a portion of the gas fees on every transaction to reduce ETH supply. EIP-1559 could be thought of as an “ETH buyback,” making Ethereum a deflationary asset
Certain miners publicly opposed the update since it would hurt their source of revenue. For instance, SparkPool and Bitfly, two of Ethereum’s key mining pools, shared their concerns on Twitter, stating that they were “sad to see many people only care about price now.” As a result, the hashtag “#stopeip1559” gained a significant amount of support.
While several community members threatened to move their hashrate to Ethermine for 51 hours, Ethereum creator Vitalik Buterin vowed for a more immediate merge of Ethereum 1.0 and Ethereum 2.0. The merge would mark a more thorough transition to proof-of-stake and prevent miners from attacking the network.
As tensions heated up between miners and Ethereum developers, market participants became concerned over the network’s stability. The potential Indian ban on crypto also served as fuel for a sell-off that saw ETH drop by nearly 22% to hit a low of $1,550 on March 24th.
Thankfully, Ethereum layer 2 solution Hermez Network launched on mainnet promising to alleviate some of the well-documented congestion issues. Through ZK-Rollup technology, it was suggested that ETH would process vast amounts of transactions, moving billions of dollars worth of digital assets.
The announcement was well received by the crypto community alongside Visa’s decision to allow digital currency payments settling directly on the Ethereum blockchain. Such positive developments allow Ether to recover the losses incurred and close the month in the greed.
The Bull Run Isn’t Over Yet
April has historically been the most bullish month for Bitcoin and Ethereum. Price data reveals a 51% average gain for both cryptocurrencies during the fourth month of the year. More importantly, Coinbase’s upcoming listing on the NASDAQ could significantly affect prices since it will bring digital assets to a new realm of investors.
Market participants have already been placing their bets for the coming weeks. With $2 billion in open interest and a 0.79 put/call ratio, speculators forecast BTC will reach a price of $80,000 before the end of the month. Meanwhile, Ethereum’s technical indicators predict a nearly 40% advance towards a new all-time high of $2,500 or higher.
Konstantin Anissimov, Executive Director at CEX.IO