s Key Takeaways
Ethereum has experienced a significant increase in gas fees, which reached an eight-month peak. This is primarily driven by excitement around the new ERC-404 token standard known as ERC-404. Meanwhile, the price of Ethereum has been on the rise since January 25, from a low of $2,166 to a high of $2,538 on February 11.
This 17% increase saw the price just 5% lower than its December 25 peak of nearly $2,700. Does this mean ETH’s price will rise further or will the network congestion negatively affect its price?
On February 9th, gas prices hit an average of 70 gwei, with a high of 377 gwei, levels not seen since May 2023. This spike coincided with growing interest in the ERC-404 standard, which integrates ERC-721 (NFTs) with ERC-20 tokens to enable fractional ownership of NFTs, allowing multiple owners to trade or stake parts of an NFT.
The increased network activity, particularly on Uniswap (UNI), has been attributed to the trading of ERC-404 projects like Pandora and DeFrogs, contributing to a combined volume of over $600 million in just a week. This surge in activity has raised concerns over gas consumption, with ERC-404 transactions requiring substantially more gas than typical NFT transactions.
Even though the development team behind ERC-404 is working on a solution to reduce gas consumption, it has already received considerable pushback from the community.
In response to the surge in Ethereum transaction fees following the popularity of ERC-404 tokens, a team of developers, including one known as cygaar, is finalizing an alternative called “Divisible NFT” or DN-404.
This new standard aims to offer a more efficient coding solution to reduce gas costs. It aims to address increased fees. Indeed, these costs rose to a seven-day moving average of $11 from $4 at January’s end. This was, at least in part, due to the ERC-404 token wave.
However, there is a noticeable divide between the original ERC-404 proponents and the DN-404 developers, with unsuccessful attempts at collaboration. This rift suggests that investors and traders interested in these divisible NFTs face a choice in the technology’s potential success. They will also have to decide which version to support amid a backdrop of rising Ethereum network fees.
Ethereum’s price reached a high of nearly $2,700 on December 25, its highest point since May 2022. This came from an a low of $1,000 in June 2022.
This could be the end of its first bullish structure in the starting bull market. If this is true, a correction should start now. But with the price rising from January 25, we could see another climb to a higher high.
This is why what price does next will determine the further outlook. If it rises and moves past $2,600, the likelihood of another high above $2,700 would be high. But if it falls below $2,366, that would mean that the uptrend from January 25 was corrective. In turn, this would suggest ETH, could be headed to a more significant correction.
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