Ethereum 2.0 Upgrade Brings Instant Recovery in ETH Market

2021/10/29 11:01:07

With altcoins proceeding to the north, the cryptocurrency market is definitely getting off to a good start. It was just Bitcoin that had been rising higher and higher, breaking all-time highs in the process. Now that BTC crypto has come to a standstill at its peaks, altcoins, notably Ethereum and many other altcoins, have begun to make bold swings. Not most of them reached their all-time high, but their pace may surely help them get there.

When it comes to the present price movement of altcoins, practically all of them have experienced a sharp drop. The action was first interpreted as little profit-taking in the market, but the views altered when the market continued to fall.

Ethereum, for example, which had been trending in lockstep with Bitcoin, plummeted earlier this week from the barrier it had set at the ATH. Although the buyers' enthusiasm was high during their march, the sellers at the supply had excess orders to be satisfied. The price drop was considerable, bringing the prices back to the support levels.

Much Awaited ETH 2.0 Altair Upgrade Goes Live

It is well known that the quantity of coins that may be created in Ethereum crypto has no limit. Thus, the ETH 2.0 update was introduced to bring market dynamics into balance. The Altair upgrade is the first official mainnet upgrade to the beacon chain mechanism.

As per CoinMarketCap, there are now over 118 million ETH tokens in circulation. Although the currency has no supply restriction, one cannot expect the number to increase much henceforth. Following the conversion to Proof-of-Stake from Proof-of-Work, the amount of ETH in circulation is anticipated to decrease by 2 percent every year. If current rates continue, the network will begin to destroy more ETH than it generates with each new block.

This year has been a game-changer for Ethereum, as the crew released the most important update in August. The London hard fork featured EIP-1559, an Ethereum reform proposal that doubled the batch size of every block to deal with data traffic and eliminated transaction fees to miners rather than transferring it to them.

The objective was to artificially depress the supply for the coin with a circulation quantity six times that of Bitcoin. And the team has already made significant headway in accomplishing the objective. Thus far, ETH issuance has fallen by 57%, with approximately 630,000 ETH destroyed and around a million handed to miners.

The 27th of October was a key day for Ethereum, as the network prepared to release Altair, the next major upgrade for Ethereum 2.0 Beacon Chain. With this improvement, ETH 2.0 will become a fully proof-of-stake (PoS) network, which has been in the works for more than one year.

According to an Ethereum Foundation blog post explaining the work, Altair is a version of the Beacon Chain that brings support for compact clients, pre-validator immobility leak reporting, a jump in pruning severity, and robustness to validator incentives. The blog mentioned that this update is just a "warm-up upgrade" for the Beacon Chain and its consumers. The upgrade will effectively offer dozens of new features.

Although the Altair upgrade is unlikely to significantly influence Ethereum’s consumers, it is indeed a critical enhancement for programmers and other community members who anticipated the merge. Early last month, a testnet running Proof-of-Stake with many Ethereum clients of the old and new versions was successfully constructed by roughly 40 executives from the ETH and ETH 2.0 communities, the Ethereum Foundation, and ConsenSys.

Total Locked Value in DeFi Persists Higher

Since March last year, the total value locked (TVL) in DeFi products has been progressively growing. And Interestingly, the price of ETH has been rising with pretty much the same trajectory. Ever since both reached their all-time highs on the same day, TVL on the charts has mostly tracked the price movement of ETH.

While the price of ETH hasn't yet established a new all-time high, the total locked value in DeFi has. With almost $240 billion locked in DeFi instruments, value locked broke over the previous all-time record at the beginning of September and proceeded to hit a new peak last week.

On the Uniswap decentralized exchange, the volume of transactions portrays a quite different perspective. Uniswap, which is considered to be a major DeFi exchange, had its transactions spike in May when the price of Ethereum reached its ATH. In comparison to TVL, however, the reaction to the May consolidation and June-July recovery decline has been the extreme opposite. The number of transactions continued to decline until September when it hit a new annual low.

Ethereum Price Update

Ethereum’s price wobbled and fell under the $4,000 mark after Bitcoin dropped below its $60,000 support level. However, its return above the aforementioned level, as well as the more-than favorable fundamental position of Ethereum, brought ETH past $4,000 once again.

Ethereum price chart on the 8-hour timeframe | Source: ETH/USDT

The second-largest cryptocurrency by market cap is currently trading slightly below its previous all-time high of $4,400, with investors being more bullish than ever. If we take both Ethereum’s fundamentals and technicals into consideration, it won’t be a surprise if ETH makes its way past its all-time high, and pushes towards $4,500.

Stay tuned and watch the KuCoin Blog for the follow-up articles related to this topic. All the best!

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