The number two global cryptocurrency, Ethereum (ETH), has had a historic crypto year in 2022 with “The Merge”. However, ETH still fails to decouple from the developments in the overall market in the first days of 2023 and trades at around $1,250 without much momentum. In this phase of stagnation – which also applies to Bitcoin (BTC) – two indicators stand out, however, which raise the question of whether they can have an impact on the price of Ethereum in the medium term.
The number of daily transactions on Ethereum fell below the 1 million mark several times in December and at the turn of the year, according to data from Etherscan. Does this mean ETH is losing its appeal? Probably not – because reduced trading activity “between the years” is also known to the stock markets, for example, and is related to the fact that institutional investors take a vacation and private investors temporarily turn off their computers.
The transaction fees (“gas fees”) on Ethereum have also collapsed on individual days, as can be seen from the data collected by Dune. But the problem of transaction fees perceived as too high has accompanied Ethereum for years and was not captured with “The Merge.” In practice, traders are therefore increasingly turning to so-called Layer 2 solutions such as Polygon (MATIC) to process their transactions more cheaply in the ETH ecosystem. MATIC has benefited significantly from this in 2022, with around 3 million daily transactions currently being measured there. But these just revolve primarily around ETH and ERC-20 tokens, Polygon needs a strong Ethereum as a base.
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Conclusion: Ethereum hopes for momentum in 2023
Contrary to the assumption of individual voices from the crypto scene, the indicators described above are not suitable for attributing dwindling activity and attractiveness to Ethereum. In the important growth sector DeFi, ETH remains the measure of all things with a 60 percent market share, and there is also no way around Ethereum in the NFTs sector. In the medium term, the developers of Ethereum want to increase the performance of the network many times over through sharding and thus also lead transactions back to the source. There are signs of milestones here that could provide impetus for the price curve of ETH.
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