Like most of the cryptocurrency market, Ethereum has performed well over the past few days. This strength culminated in a rally to the crucial level of $250 on Wednesday, as depicted in the chart seen below.
Chart of ETH’s price action over the past seven weeks from TradingView.com
The ongoing surge has been quick to flip cautious investors into bulls.
One trader postulated that ETH is now on track to hit $300, citing the bullish break of its market structure and its outperformance of BTC.
Yet some fear that the asset may underperform due to fundamental reasons, namely that Ethereum transaction fees are at extremely high levels.
Ethereum Transaction Fees Spike, Hurting Bull Case: Analysts
According to the screenshot below of ETH Gas Station, a data site showing Ethereum transaction fee data, the “gas price” recently hit 73 Gwei.
This means that transaction fees were temporarily at their highest levels in months, making it unsustainable for most users.
ETH Gas Station (site that shows the average transaction fee/gas price) screenshot from Ethereum proponent and writer/content creator “DeFi Dad” (@defi_dad on Twitter)
Even after the initial spike, the gas price remains at 35 Gwei as of this article’s writing — over four to five times higher than the gas price during lulls.
This is to be expected: if there is more demand for Ethereum transactions, the cost to send transactions will rise. But some analysts and proponents of the network believe that high transaction fees could be Ethereum’s downfall.
Qiao Wang, a former head of product at Messari, recently said on the matter:
“So long as ETH 2.0 is not fully rolled out, there’s an obvious opportunity for a highly scalable blockchain to dethrone Ethereum. Paying $10 transaction fee and waiting 15 seconds for settlement is just bad UX.”
This sentiment was echoed to a T by Scott Lewis, the co-founder of Concourse Open Community. As reported by Bitcoinist previously, he said that high Ethereum fees cement the sentiment that ETH hasn’t beat its competitors yet.
ETH Competitors Gain Strength
Although we’ve yet to see Ethereum’s dominance fully threatened, the asset’s competitors are gaining strength.
Cardano — a smart-contract blockchain launched by Charles Hoskinson — has performed extremely well this year.
Year to date, Cardano’s ADA coin is up by 200%, trading at $0.13 as of this article’s writing. For context, ETH is up a relatively weak 90% since the start of 2020.
The asset’s outperformance is predicated on the launch of the so-called “Shelley” upgrade. The Cardano Foundation describes the upgrade as follows:
“The Shelley era represents the natural maturation of the network, making it more useful, rewarding, and valuable for users new and old. It’s also about preparing for the future. Shelley will set the stage for a fully distributed network, and an entirely new application ecosystem with even greater things.”
How the upgrade will be received by developers and users remains to be seen. But, speaking to Messari CEO Ryan Selkis, Hoskinson said that he thinks Ethereum’s market share may begin to shrink.
Featured Image from Shutterstock
Price tags: ethusd, ethbtc
Charts from TradingView.com
Despite Rally to $250, Ethereum Was Just Dealt This Fundamental Blow