The optimism surrounding the upcoming London hardfork is driving the Ethereum prices higher. Furthermore, the rising DeFi and NFT activity on Ethereum fuels the price surge.
Last week, the overall cryptocurrency market rallied more than 7% moving past $1.6 trillion in valuations. Bitcoin and other altcoins registered a convincing rally breaking past crucial resistances. But over the last weekend, the crypto market has seen some slowdown in its growth, except for Ethereum (ETH). Ethereum (ETH) price has surged past $2600 looking for further gains ahead. On Sunday, August 1, the ETH price gained 6% extending its weekly gains to more than 21%.
After major consolidation over the last few weeks, the market cap for Ethereum has also moved past $300 billion. Part of this rally could be attributed to the upcoming London hardfork on August 5.
This hardfork will bring the EIP-1559 protocol which will introduce ETH burning as part of the gas fee. It will further lead to a reduction of the ETH supply in the market thereby driving prices higher.
With the surge in the DeFi and the NFT activity on the Ethereum blockchain network, the ETH gas fee has been rising to a great extent. Thus, Ethereum investors and network participants are cheering the arrival of the EIP-1559 protocol. Even though the reduction in miner fees is a welcome over for investors, it is disappointing for miners.
Ethereum miners have heavily opposed the EIP-1559 implementation as the gas fee reduction will put pressure on their revenues. However, this is happening sooner or later as we move to the Ethereum 2.0 Proof-of-Stake (PoS) protocol.
The London hardfork will also introduce EIP-3554 which is an incremental difficulty adjustment. This will also incentivize the migration to the PoS Ethereum blockchain.
Ethereum (ETH) Price amid the Rising DeFi and NFT Market
One of the major contributors to the ETH price rally is the rise of the DeFi and NFT markets. The Ethereum blockchain contributes to more than 70% of the activity in each of these markets.
The DeFi summer of 2020 created a massive rage with DeFi markets making a significant contribution to the crypto space. As of date, the total value locked (TVL) in DeFi has surged past $70 billion.
However, the summer of 2021 belongs to non-fungible tokens (NFTs). The NFT games available on Ethereum have exploded in popularity recently. Projects like CryptoPunks have registered a strong trading volume for their NFTs. Last week itself, an Ethereum whale purchased millions of dollar worth of CryptoPunk NFTs.
The Ethereum 2.0 implementation has taken a while moving further from the previous deadlines. However, market analysts are quite optimistic about the upcoming London hardfork. If successful, this will help to fastrack the complete implementation of Ethereum 2.0 Proof-of-Stake (PoS).
However, any further delays could give opportunity to Ethereum competitors to gain more market share. Besides, it will force existing Defi players on Ethereum to look for other alternatives. Two popular DeFi projects – Curve and AAVE – have already added support for blockchains other than Ethereum.