The price of Ethereum’s Ether has been rallying in the lead-up to the EIP-1559 upgrade.
ETH crossed $2,500 for the first time since June 16 over the weekend — that’s a 47% increase from $1.7K on June 22, the lowest since hitting an all-time high above $4.3K on May 12.
Analysts and traders speculate Ethereum’s London upgrade is driving the rally, as one key piece in the change will prompt part of ETH spent in transactions to burn. If the amount of ETH burned is higher than the amount of ETH issued, a lower circulating supply of the cryptocurrency could put upward pressure on its price. That change happens tomorrow.
“Given how irrational the crypto markets are, people underrate that the long-term is driven by fundamentals, and 1559 is the most bullish fundamental change for $ETH since mainnet launched 6 years ago,” crypto influencer Evan Van Ness told The Defiant.
EIP-1559, which is set to be implemented on August 5, will change Ethereum’s gas mechanism in an effort to make gas fees more predictable and less vulnerable to manipulation. To do this, the protocol institutes a base fee, which will fluctuate depending on the traffic on the network and the ability for users to tip miners on top of that. The base fee won’t go to miners, instead it will be permanently burned.
ETH holders are thrilled with the prospect.
“$ETH is pumping hard before EIP-1559,” wrote crypto investor and influencer @LilMoonLambo on Twitter.
But not every trader thinks the EIP-1559 news is the only thing driving price action, especially when gas fees on Ethereum would need to consistently be above the 150 gwei mark in order for ETH to truly become a deflationary asset.
“I’d guess that EIP-1559 was largely priced in and helped drive the ETH run up to 4K,” crypto trader and member of The Defiant Discord community, who goes by the online name of Rooster Cobgurn, said in an interview. “The L2 Scaling solutions etc have largely left NFT generative drops to be the only real factor driving ETH gas past the 150 gwei mark…to actually be deflationary.”
Eric Wall, the CIO of the crypto fund Arcane Assets, posited that recent price movement may be more closely related to NFTs than EIP-1559.
“Possible explanations for this could indeed be high expectations before the EIP1559 activation, but even more so, it seems like the NFT hysteria has been reignited (by cryptopunks foremost), which has been the most crucial driver for Ethereum during the last few days.”
Whatever the driver, the recent rally is pushing ETH up faster than Bitcoin. Ethereum’s cryptocurrency is up 14% in the past week, compared with BTC’s increase of 1%. The ETH/BTC ratio is at the highest since July 8.
Throughout 2021 actually, Ethereum has massively outpaced the growth rate of Bitcoin. Since January 1, Ethereum has grown 238% from $740 to $2.5K while Bitcoin has grown 31% from $29K to $38K.
The big question is, will traders sell the news tomorrow, or will ETH continue climbing.