ETH Price Soars to Record Highs Resulting in Crippling Gas Fees
Ethereum has finally given a breakout about its previous lifetime high and seems to have entered price discovery mode. The second-largest cryptocurrency surged past $1,700 in the last few sessions before correcting slightly lower. The bulls are now likely eyeing $1800 as the next target.
The massive uptick comes just as the Grayscale Ethereum Trust added 25,000 ETH coins worth a whopping $37.6M to their coffers on Feb 3. Just two days prior, the digital assets manager had announced the reopening of its Ethereum Trust to accredited investors.
Grayscale seems ready to go all-in on ETH, as per the bullish sentiment in their latest asset valuation report. The firm believes that ETH is already functioning as ‘new-age’ digital money, and its uses will only increase as apps continue to grow on the Ethereum blockchain.
The ETH price is also benefiting from the imminent rollout of the Ethereum futures’ rollout on the CME in the coming week. The listing will likely help ETH gain even more traction amid investors and foster an explosion in institutional ETH buying.
These factors are bullish for Ether, trading at over 120% gains year-to-date and could be headed to the moon as more institutional and retail investment inflows come in.
ETH Gas Fees Spike to Record Highs
The ETH price rally into new price highs has placed a higher demand on the token’s underlying network, resulting in ridiculously high gas fees for stakeholders.
The average transaction fees have risen by almost 400% since the start of the New Year, raising concerns over the unsustainable cost of using the Ethereum network.
Gas fees have spiked higher by over 20% amid the latest ETH price surge, hitting record highs at $17.67. According to on-chain analytics firm glassnode, ETH gas fees have hit a new all-time high of $898,000 in the past 24 hours.
DeFi traders are especially having it tough when performing complicated transactions, as they are being forced to incur higher costs on the network.
The rising costs are rendering some DeFi protocols unusable to the average trader. These projects require the execution of complex smart contracts and have already started charging untenable gas fees as demand for the network explodes.
For instance, one Twitter user lamented paying almost $5K in gas fees to accept a bid on DeFi protocol Rarible. Besides, even executing simple swaps on Uniswap and SushiSwap cost $37 to $75; such rates could leave traders unable to unwind their DeFi positions when the time comes to sell, and gas fees are exponential.
Is There a Solution to Soaring Gas Fees?
Miners on the ETH network have raked in a staggering $325M in transaction fees since Jan 1. These high figures demonstrate the ability of miners to manipulate gas fees and extract extortionate amounts from users.
The issue of soaring gas prices hasn’t escaped ETH core developers’ attention, who plan to fix the problem with Phase 1.5 when the Ethereum 2.0 mainnet becomes a shard. The upgrade will be ready in the course of the year, according to Ethereum network developers.
In the meantime, leading ETH developers are working on a quick fix to resolve skyrocketing gas fees as soon as possible. Developer Tim Beiko recently noted that his team had made significant progress in replacing the current system that puts miners in charge of fees with the EIP 1559 variable base fee process.