Why are you hesitating as Ethereum EIP-1559 approaches?

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Ethereum’s EIP-1559 upgrade is rapidly approaching, with the asset trading just under the $2100 mark at the time of publication. After rebounding from a dip in the last week of June 2021, Ethereum has successfully reclaimed the $2000-level. According to on-chain statistics from IntoTheBlock, this increased the ratio of big wallet investors holding Ethereum to 42 percent.

Approximately the last week, over $85 billion in big transactions have occurred on the Ethereum network, and on-chain sentiment remains gloomy. And there’s more.

Despite the fact that the upgrade is getting closer and on-chain activity has grown, traders on futures markets remain wary of their holdings. What do they hope to gain from the upgrade? Is there concern about a price decline and long holdings being liquidated to fund shorts on derivatives exchanges?

The financing rate on key exchanges is significantly lower than the peak seen between January and April of 2021, with negative values still visible on platforms like as Huobi and Bitfinex.

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Why is this the case?

The EIP-1559 update is not expected to solve the problem of gas taxes straight away. It is anticipated that it will serve as a starting point for making the system more efficient in the long run. On a block-by-block basis, the basic charge is intended to adapt to market rates. Users will be able to speed up transactions by tipping the miner, and the base fee will be burnt. Because the charge is paid in Ethereum, this may have an effect on the price of the cryptocurrency.

Additionally, Ethereum may face deflation in response to this update. Because ETH intends to transition from the Proof of Work to the Proof of Stake paradigm, it is quite possible that ETH will become deflationary at some point. All of this, however, may have to wait until ETH 2.0 goes online.

Furthermore, in terms of price and return on investment, ETH suffered a greater drop than Bitcoin in June 2021. The altcoin’s price has plummeted by more than 40% from its highs on the charts. Traders are more cautious than ever, but as with past Ethereum network improvements, this may just add to the asset’s worth and drive a price surge on the back of the roll-out, especially because Ethereum’s network effects are likely to grow more pronounced.

Source: Coinstats

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