Ethereum Crosses ATH! Upcoming Insane Run to $10,000 And Beyond

Ethereum has established a new ATH and the upcoming bull run continuation can see ETH cross over to $10,000 and beyond, what will enable it?

Dennis Weidner

Dennis Weidner

October 22, 2021 2:07 AM

Ethereum Crosses ATH! Upcoming Insane Run to $10,000 And Beyond

Ethereum has crossed its previous all-time high of $4356 (as recorded on CoinGecko). The world’s largest smart contracts platform has now seen a weekly appreciation of 20.9% and is changing hands at $4361, at the time of this writing. There are several wild predictions about Ethereum’s upcoming insane bull run, ranging from $10,000 to as high as $150,000 by 2023! But, what will be the driving factors behind it? Layer 2, fees generation and burning, the upcoming merge and reduced issuance, major companies building on top of the protocol or a combination of all these? Let’s see!

Rise Of Ethereum Layer 2

There’s little doubt that the rising fees and higher processing times have ensured that average users are priced out of using Ethereum readily. While it does prove that Ethereum’s blockspace is in extremely high demand and the security budget is healthy, the operations on the base layer have gone cost-prohibitive. The good news is that the Layer 2 protocols are coming up online, offering cheap transactions and faster processing times. They are diverting load off the mainnet, showing explosive growth, and their total value locked (TVL) figure has reached $3.94B or 952,597 ETH.

The top position is held by Arbitrum – an Optimistic Rollup with a 60.88% market share and $2.40B in total value locked (TVL). It’s followed by dYdX – a Zero-Knowledge Rollup with a 22.35% market share and $882M in total value locked (TVL) and Optimism – another Optimistic Rollup with a 7.08% market share and $279M locked. Ethereum Layer 2 segment is dominated by Rollups. To top it off, the leading quasi-L2 solution of Polygon (with over $9.69B TVL!) announced a recent merger with Hermez to utilize their Rollups technology, confirming that Polygon is planning to move from its stopgap Plasma POS scaling solution and aiming to become a proper L2.

Fees Generation, EIP1559 Burning

It goes without saying that Ethereum blockspace has become the most valuable in the entire crypto space and the leading smart contracts platform generates fees in excess of $30M for its miners. But that’s not the only thing, the top ten list in fees generation consists of 6 Ethereum based protocols such as Uniswap, Sushiswap, etc. For perspective, it is 27X more than the daily fees generation and 41X more than the weekly fees generation of Bitcoin!

Since the deployment of EIP1559 on Aug 05, Ethereum executes a sort of share buyback and burns a part of fees, proportional to block space usage. From its inception, EIP1559 has burned around 587,496 ETH worth $2.48B at the current rate – a net reduction of 56.77%! As the demand for the Ethereum block space further rises, the supply goes down in parallel as the miner’s portion of base fee gets burned, reducing circulating supply and increasing ETH value!

Triple Halvening Event, the Merge, POS and Eth2

Apart from the successful deployment and continued rise of Ethereum L2, the protocol is also nearing other significant upgrades. First is the upcoming Merge and complete transition to Proof of Stake (POS), this will reduce Ether’s emission by 90% and the event is being known as a triple halvening event since it will reduce the released supply by a factor of 3 over what Bitcoin does, every four years!

Since POS is highly efficient, the protocol doesn’t need to pay its validators, the same ETH issuance as what it used to pay miners. The selling pressure will go down massively and with the fees burning, Ethereum is bound to go deflationary after a period of time, at even gas fees as low as 15 gwei (assuming 10M ETH are staked)! The merge, POS transition, and the triple halvening event will happen at once, as early as next year, but they would just open the path for deployment of further Ethereum 2.0 phases.

Yes, Ethereum 2.0 is the next big upgrade and all the other events are just paving way for the second iteration of the world’s computer. Apart from the transition to Proof of Stake (POS), it will introduce eWASM and sharding. It will reduce the resources, required to run the Ethereum network, as well as bring scalability and performance improvements.

And ETH…bigger move…$40k by March/June would only be 1 standard deviation overbought versus trend.

The Eth2 upgrade was planned implemented in three phases, with the first Phase 0 Beacon Chain, already going live last year. After this, comes the merge and transition to Proof of Stake, as discussed above. This will be followed by Phase 1 in Q1 2021, which will introduce sharding and allow data to be stored on shards, however, transactions can’t still be processed there.

Phase 2 will make the Ethereum 2.0 truly complete and the network operational, after its introduction at some point in 2022. It will bring the Ethereum WebAssembly (eWASM) replacing the now operational Ethereum Virtual Machine (EVM). Ethereum would have successfully completed its upgrade by then and achieved a long-awaited feat of changing aircraft engines in mid-air, as some like to use the analogy.

Green Ethereum – 99.99% Less Power Usage

There’s a lot of public interest in the green narrative and multiple segments of the society appear to be legitimately concerned with the high resource usage of Proof of Work (POW), which is avoidable and the environmental harm can be significantly reduced by switching over to Proof of Stake (POS). Ethereum is all set to soon shift to POS and increase the blockchain’s energy efficiency, increasing its worth for environment-conscious investors at the same time. Ethereum foundation’s Carl Beekhuizen announced on May 18, in a blog post titled “A country’s worth of power, no more” that the Ethereum network’s power consumption will decrease by 99.95% after the merge!

Once power-hungry and gas-guzzling Proof of Work (POW) is retired in favor of Proof of Stake (POS), Ethereum 2.0 will utilize around 0.001-0.002 Giga Watts (GW) of power against 5 GW for the current Ethereum setup. The same figure is almost 14 GW for the Bitcoin blockchain! A Proof of Stake (POS) arrangement is more than 2000X power efficient than the current Proof of Work (POW) and of course has a negligible environmental impact! Ethereum 2.0 will have power usage, equivalent to a small town, against that of a medium-sized country currently.

How much power does it take to run a beacon node (BN), 5.4 validator clients (VC), and an eth1 full-node? Using my personal setup as a base, it’s around 15 watt. Joe Clapis (a Rocket Pool dev) recently ran 10 VCs, a Nimbus BN, and a Geth full node off of a 10Ah USB battery bank for 10 hours, meaning that this setup averaged 5W. It is unlikely that the average staker is running such an optimised setup, so let’s call it 100W all in.

Metaverse, Major Companies Adopting Ethereum

The world’s computer also appears to have created a new movement in art! The Non Fungible Tokens (NFTs) issuance and trading primarily happen on Ethereum, as it has the most advanced infrastructure for that purpose. There is significant buzz that Ether will be the currency of the re-imagined internet-based reality or the Metaverse -a virtual 3D shared space. Even the old-age Counterparty-based assets are gaining prominence and fetching good prices, once wrapped in Emblem vaults and brought over to Ethereum. OpenSea recently announced that it has crossed a trading volume of $1B+ in 2021 alone and the leading NFT marketplace appears to be just starting. As most NFT projects choose to launch and build their base on Ethereum, it is likely that the protocol will become the hub of the Metaverse!

But that’s not the only thing. A lot of major companies and banks have started building on Ethereum. For instance, we have the recent example of Twitter announcing that users would soon be able to use their NFTs as Twitter Avatars, third-largest French multinational bank Société Générale or SocGen submitting a $20M Maker DAO proposal on Sep 30 for collateral on-boarding and security token refinancing, in a bid to explore the intersection of traditional and decentralized finance and Credit Suisse integrating security tokens on the blockchain on Oct 06.

The popular video-sharing social media company TikTok also announced on Sept 30 that it’s launching a “popular moments” based NFT collection on Ethereum L2 solution Immutable X. It has an extremely high following amongst the young crowd and crossed 1B users faster than any other social media app. Leading payment processor Visa also announced on Sept 30 that it’s in the process of deploying the “Universal Payments Channel” on Ethereum for making CBDCs interoperable and has launched a concept on Ropsten testnet.

European automotive financing firm Auto1 FT announced on Oct 7 that it is shifting all manual processes to the blockchain, by leveraging Ethereum based smart contracts for greater transparency, efficiency, and protection against fraud. Facebook appears to have abandoned its Diem concept for the time being as the leading social media company announced on Oct 19 that it’s launching the Novi wallet pilot using Ethereum based USDP stablecoin. The world’s computer appears to have finally become the platform, which the world builds upon!

Dennis Weidner
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Dennis Weidner

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