Ethereum 2.0 Deposit Contract Crosses 3 Million ETH

Ethereum 2.0 Deposit Contract Crosses 3 Million ETH

Ethereum 2.0, the network upgrade of ETH, has crossed 3 million ETH under its deposit contract as the Ethereum community extended their support for ETH 2.0. The total value of ETH locked under the network upgrade jumped above $5.4 billion after the recent jump in the price of the world’s second-largest cryptocurrency.

Ethereum 2.0 started its journey in December 2020 with the launch of Beacon Chain. ETH 2.0 deposit contract crossed 1 million ETH within the first week of its launch. The Ethereum network has started its journey to shift from the current proof-of-work network to a more efficient and improved proof-of-stake network.

The ETH price is up nearly 150% since the start of 2021. The world’s second-largest digital asset registered an all-time high of $1,870 on 13 February as the total market cap of Ethereum jumped above $210 billion. As of writing, the cryptocurrency is trading near $1,750 with a total market cap of $200 billion.

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The CME Group launched Ethereum Futures Contracts last week and the Group reported trading of 388 ETH contracts with a total trading volume of $33.6 million on its first day. Additionally, ETH’s on-chain network activity has increased significantly in the last few months as now the network is settling more value than BTC.

Ethereum Inflows

Finance Magnates earlier reported a significant jump in Ethereum-related weekly crypto inflows. ETH accounted for nearly 80% of the total $245 million crypto inflows during the first week of February 2021. Institutional demand for the world’s second-largest crypto-asset jumped substantially since the launch of Ethereum 2.0. Now, Grayscale has 3.13 million ETH under management with a total value of $5.67 billion. The CEO of Grayscale Michael Sonneshein reported growing interest in Ethereum-related investment products.

Ethereum 2.0 received strong support from the crypto community as staking participants are hopeful for an improved version of the network in the form of ETH 2.0. The current transaction fee of ETH is a big issue for the users, the network upgrade aims to address the issue of large transaction fees and the number of transactions per second.

Ethereum price pulls back to US$1,700 while gas fees spike

As prices dropped and trading bots spun up, network congestion trapped smaller players in their positions.

The market-wide correction resulted in an ETH slump.

The sudden shift caused gas fees to temporarily spike, limiting network usability.

Experts believe that with time many of Ethereum’s ‘closest competitors’ will be faced with similar scalability issues.

The last 24 hours have been somewhat of a rollercoaster ride for Ether, as the second-largest cryptocurrency by total market capitalization, fell from $1,860 to a relative low under $17,000. At press time, the digital asset is trading at around $1,700.

However, despite these fluctuations, the premier altcoin’s fundamentals continue to look strong, with a run up to the all-important $2,000 psychological barrier still seeming quite imminent. On the subject of ETHs monetary future, Grim Reaper, the pseudonymous founder of cryptocurrency project Pylon.finance, told Finder:

“I think we’ll see Ethereum probably hit $2,000 and then it’ll be up to the market to determine a correction (or not) from there. I’m being told Bitcoin is following gold, so we may see a correction start in May and rebound towards Q4, but bear in mind this is almost entirely based on previous cycle studies and syncing Bitcoin’s movement to gold.”

A similar outlook is shared by Max Krupyshev, CEO of CoinsPaid.com, who too believes that Ether’s short term outlook looks incredible and that there is no reason to doubt that the altcoin’s current growth spurt will slow down anytime soon - citing bullish market conditions as well as the general increasing trust around crypto as being the primary drivers.

Not only that, Krupyshev also highlighted that this current upward momentum we’re witnessing can potentially help spur the rise of many altcoins, especially as Ether’s scalability problems continue to become increasingly prominent, adding:

“Well the market is moving sideways, for now, and Ether should hit 2k at least once before correction. The currency’s growth will carry on until the seasonal downturn but is unlikely to fall below $1000. Despite its significant capitalization, Ether remains the № 2 cryptocurrency with the same continuing problems - i.e. it still hasn’t resolved its issue of network scalability”

So-called “Ethereum killers” need to prove themselves

As prices dropped, arbitrage and liquidation bots on Ethereum began to ply their trade, causing gas fees to surge and trapping people in their positions, and presenting an example of how important scalability can be to overall network health beyond cheap transaction fees alone.

As Finder reported earlier, in light of Ether’s rising gas fee issue, other ecosystems with in-built smart contract functionality like Binance Smart Chain (BSC), have been gaining a lot of traction. For example, yield aggregator Harvest Finance and multi-service platform Value DeFi are just two projects that recently expanded their operations on to Binance’s blockchain.

While on paper, BSC and other competitors offer their users with minor short-term advantages related to chapter transactions, lower network congestion, etc, a number of experts have suggested that as and when these platforms gain significant mainstream traction, they too will be faced with the same issues as the Ethereum network. On the subject, Grim Reaper pointed out:

“It’s funny because we’ve been here before. When Tron offered the same solution Binance has now. BSC offers a kind of ‘pressure release valve’ until developers can catch up to network demands.”

He further equated ETH’s current scalability issues to the problems faced by the global ‘mask and disinfectant supply chain’ at the start of COVID in March 2020. “Once supply chains caught up to speed, prices returned back to normal, and possibly even cheaper”, he added, suggesting that once developers are able to successfully facilitate the ETH2.0 transition, the scalability issues everyone is currently going on about may soon become a thing of the past.

Also, another thing to bear in mind about Ethereum’s network congestion problem is that we’re currently in the midst of the Chinese New Year, which means that little-to-no mining hardware is being produced at the moment. This is another possible reason for the currency’s native TPS (transaction per second) rate being at relative lows right now.

CME futures launch fails to push Ether over $2,000

Following the launch of Ether futures on CME earlier this month, there was nervousness in the market as to which direction the digital asset would go. While initially there were calls for ETH to dip significantly, the currency’s continued stability after the launch led many to believe that Ether may now be on an upward trajectory, especially since the news was coupled with Tesla’s announcement of entering the crypto market.

That being said, ETH has failed to break the $1,900 barrier even though it has come close a number of times. Commenting on why Ether futures have been unable to spur the currency’s value, Krupyshev opined:

“I do not think that futures will bring any changes in the nearest time. It can be seen as an additional tool for traders. But for miners or holders, it doesn’t hold any value. However, for those engaged in raising or lowering the price, it turns into an indispensable tool.”

He added that it is quite surprising to him that the ETH dev team has failed to address critical community concerns regarding scalability, something that could potentially result in unwanted price movements that could annoy a lot of ETH users as well as prevent the network’s much talked about Proof of Stake algorithm from deploying correctly. Only time will tell how things will play out now.

Interested in cryptocurrency? Learn more about the basics with our beginner’s guide to Bitcoin, dive deeper by learning about Ethereum and see what blockchain can do with our simple guide to DeFi.

Disclosure: The author owns a range of cryptocurrencies at the time of writing

Disclaimer: This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service or offering. It is not a recommendation to trade. Cryptocurrencies are speculative, complex and involve significant risks – they are highly volatile and sensitive to secondary activity. Performance is unpredictable and past performance is no guarantee of future performance. Consider your own circumstances, and obtain your own advice, before relying on this information. You should also verify the nature of any product or service (including its legal status and relevant regulatory requirements) and consult the relevant Regulators' websites before making any decision. Finder, or the author, may have holdings in the cryptocurrencies discussed.

Ethereum’s ether steps out of bitcoin’s shadow

Ethereum’s ether (ETH), the world’s second-largest crypto asset, has long been overshadowed by its predecessor bitcoin. But it seems to finally be coming out on its own.

Ether is up more than 20 per cent since the launch of Ethereum Futures Contracts by the Chicago-based CME Group on Monday. A total of 388 ETH contracts were traded on the first day with a total volume of $33.6 million.

The price of ether recorded its highest level on Wednesday, jumping from $1,500 to above $1,800 within the first three days of the week. As at the time of writing, the cryptocurrency is trading above $1,810, eyeing another record high.

Ethereum created the smart contract.

It’s well known that the pseudonymous inventor of bitcoin invented the blockchain. But, outside the crypto industry, few investors understand why Ethereum hosts a technology that is just as important for blockchain applications.

The creator of Ethereum, Vitalik Buterin, wanted to find a way to do more with the blockchain than just create tokens and exchange them.

Buterin invented a way to make the blockchain power tasks, like exchange money, property, shares, rent an apartment, arrange a performance, etc. The smart contract checks for performance and authenticity and pays or exchanges or arranges delivery.

Smart contracts work with If-Then logical statements, and as blockchain analyst Jeff Garzik notes:

“You can execute contracts that say, ‘If I receive cash on delivery at this location in a developing, emerging market, then this other product, many, many links up the supply chain, will trigger a supplier creating a new item since the existing item was just delivered in that developing market.”

This is why Ethereum, which provides the framework for smart contracts, has attracted traditional and institutional investors alike, and ether, its currency, has become linked to invaluable intellectual property.

This helps to account for the fact that the number of ‘whale addresses’ (those holding at least 10,000 ether tokens ) has jumped to a 13-month high of 1,103, according to on-chain data from blockchain analytics firm Glassnode. More than 35 whale addresses have been created in January.

The increased accumulation by investors with deep pockets is unquestionably driving up ether’s price. Grayscale, the largest fund manager investing in cryptocurrencies, has received $23 million per week for ether investment in the past year. Grayscale has 3.04 million ETH with a total value of $5.19 billion. The asset manager purchased 2,954 Ethereum in the last week.

Improvements to the Ethereum blockchain

Another factor that could make Ethereum a good long-term investment is that there are plans for more improvements in the future.

Both Bitcoin and Ethereum are currently using the proof of work system to verify transactions. This is complex, time-consuming and expensive for miners, but Bitcoin is almost certain never to change it, as it is fundamental to the coin’s value. But only those who can invest thousands in mining equipment and who have access to cheap electricity can succeed in mining bitcoin.

Ethereum, which has more flexibility, is likely to change over to the proof of stake system for verifying transactions in the coming months.

The proof of stake (PoS) seeks to address the issues of dog token creation by attributing mining power to the proportion of coins held by a miner. This way, instead of utilising energy to perform the mathematics in proof of work verification, a PoS miner is limited to mining a percentage of transactions determined by their ownership stake. For instance, a miner who owns 3 per cent of the ether available can theoretically mine only 3 per cent of the blocks.

Proof of stake is also viewed by programmers as less vulnerable to certain kinds of hacking attacks.

Some analysts believe that if Ethereum does implement proof of stake, then it could make Ethereum more effectively decentralised than Bitcoin. This means that the Ethereum network could become more secure than Bitcoin.

Thanks to a number of smaller-scale improvements and the transition to proof of stake, it will be possible to process thousands of transactions per second consuming very little energy.

All of these changes are certain to add some value to ether itself.

Ether is a gateway to DeFi

Value for Ethereum’s ether is not linked to a shrinking supply, as is that of bitcoin, which ‘halves’ at specific intervals, and which will eventually run out.

“ETH, on the other hand, does not have a fixed cap. The price of ETH may be more directly related to its utility to process transactions which are used in many applications,” including a number of decentralised finance (DeFi) dApps,” comments Doug Schwenk, Chairman of DAR (Digital Asset Research).

“As more mature applications are built on Ethereum that provide greater value to the end-user, the value of the asset should naturally increase.”

A number of analysts, like Schwenk, also see an investment in ether as a gateway to investment in DeFi, decentralised finance, the most innovative and rapidly growing part of the cryptocurrency industry.

“Just like taking part in MicroStrategy’s $650 million convertible senior note offering last year was basically getting an almost-free call option on bitcoin, going long on ethereum is a way to get indirect exposure to DeFi protocols,” Denis Vinokourov, head of research at digital asset prime broker Bequant, said. “Not everyone is comfortable with the risks that are still associated with DeFi, but the hyper growth of these projects boosts activity on the Ethereum network and, thus, supports capital appreciation.”