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Ethereum (ETH) Bounces Back Following a Slip Below $3,000 Earlier This Week – What’s Next?

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Market sentiments appear less bearish on the back of the inflation statistics released yesterday. The report released by the Labor Department’s Bureau of Labor Statistics indicated that Consumer Price Index had increased by 7% during the year through December. The news rekindled the cryptocurrency market which is majorly green today thanks to top coins posting significant gains.

Yesterday, Bitcoin soared above $44,000 for the first time since last Thursday. Ether made similar recovery strides in the market after a massive dip that saw it fall to a multi-month low of $2,948 on Monday’s trading session. The token has consolidated above the $3,350 range propelled by 3.74% 24 hr. gains.

Here’s a recap of other recent exciting events around Ethereum.

Could ETH2.0 be the killer for Ethereum layer-1 scaling solutions? Experts agree

Ethereum is still in the process of moving to Ethereum 2.0 – an upgrade that seeks to solve accessibility, scalability, and other issues facing the current ecosystem. The switch, being done in phases, started in December 2020 and is expected to be complete later this year.

Experts, however, worry that the launch of Ethereum 2.0 will significantly affect the position of Ethereum layer-1 solutions. The upgrade is meant to address, among other issues, sustainability (environmental concerns) and security. The industry gurus argue  that the utility of the latter might be severely dented once Ethereum 2.0 is fully implemented.

It is worth noting that Ethereum layer-1 solutions not only face competition from the thriving layer-2 solutions but also Ethereum 2.0. The scenario in which layer-1’s potentially lose their position is a possibility, but until then they continue seeing a surge in adoption.

Ethereum’s Vitalik Buterin proposes a new multidimensional gas structure to battle high gas fees

Even as Ethereum stays on a path to scale into Ethereum 2.0, transaction fees remain a massive issue for the network. Last Wednesday, its co-founder Vitalik Buterin proposed an improved protocol to handle this issue. The proposed EIP-1559 protocol suggests a multidimensional approach towards establishing a pricing model for transactions on the Ethereum network.

The model would cap the quantity of a certain resource that a single block can consume (with a base gas fee set per resource), thus correcting these high prices.

In the first of the two possible paths that Buterin suggested, the blocks would retain their current limits. The fees for special resources such as call data would be maintained below a fraction of the set total base fee for each unit of resource.

In the second and “more pure” option, the amount of gas that each block uses will be unbounded. However, there will be a set base gas fee for using resources and a burst per resource limit. He also acknowledged that implementing this option would be difficult but explained that the model would really give a synonymous relation of gas and ETH.

Ethereum projected to serve 50% of global financial transactions in the next decade or two

In an interview published on Sunday, hedge fund manager Joey Krug of Pantera Capital told Bloomberg that he expects to see Ethereum cater for up to or more than half of the world’s financial transactions in the next 10 or 20 years.

The co-chief investment officer at Pantera Capital justified his bold prediction, noting that Ethereum has steadily retained its position as the leading ecosystem in the evolving DeFi niche. Though Ethereum rivals like Solana and Cardano have emerged as alternatives to sort Ethereum’s ever-inconveniencing issue of high gas fees, Krug said these and other altcoins have too many trade-offs in the decentralization space.

Further, alluding to security concerns, he questioned if they were well suited to fit into the new global financial setup. The Pantera Capital executive asserted that he does not see them [alts] making Ethereum sweat. Krug also noted that these rivals, to some degree, rely on the second-largest crypto network, notwithstanding the massive growth they have recorded in the last dozen months.

He, however, clarified that the success he predicts depends on the successful transition from the proof-of-work model to the more efficient proof-of-stake.

Ethereum (ETH) market performance

Ethereum’s native coin cleared the $3,100 level on Tuesday and is now targeting the resistance at $3,400. Bulls appear confident that breaking this resistance will put Ether on the path to gain and climb towards $3,800.

ETH/USD 24 hr trading chart

The 24 hr ETH/USD chart shows that the token is currently swinging between a tight range of $3,340 and $3,380. Crypto analyst Michaël van de Poppe yesterday shared his price analysis for Ethereum on Twitter, pointing out $3,350 and $3,600 as the crucial levels to keep an eye on for a bullish signal. Van de Poppe also briefly noted that Ether had posted a “Good bounce” to recover from its slump.

To learn more about this token visit our Investing in Ethereum guide.

Sam is a financial content specialist with a keen interest in the blockchain space. He has worked with several firms and media outlets in the Finance and Cybersecurity fields.

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