An exciting time for Ethereum holders as the London hard fork is coming to us on Thursday! What does this mean? This means it's going to start burning ETH, and Ethereum will become a rarer coin slowly. This means definitely the value of your Ethereum will go up over time. Well, I am not an expert or analyst, but that's what I think will happen!
We have seen recently the price of Ethereum is on fire because of this hard fork news. Actually, Eth has notched a 12-day winning streak, the longest ever. What happens typically with these types of events in crypto is that we see a significant runup on the price of an asset leading up to an event!
I don't know what exactly will happen after the hard fork. I am not a trader; I am a long-term investor. There are some sell-off after devs moved the hard fork date from Aug 4th to 5th! But as a long-term investor, I am looking at the big picture here. In my opinion, the Ethereum price has the possibility to touch the five digits. Maybe this year or next year. I don't mind waiting. Not a financial advice! I am looking at the entire chart for the long term. Ethereum is not an in-and-out investment for me.
What's so massive about this EIP-1559 update? Well, right now when you send a transaction on Ethereum, you have to pay a fee to the miner, and it's an auction model. If there's a lot of demand in the market and you want to send your transaction first, you have to outbid other people. It gets to become very expensive when this happens! Fees are ridiculously high and they change very often. One minute you might be paying a fee like $20, and then in the next minute or an hour later, you may pay a gas fee like $50! It's unpredictable!
Now with EIP-1559, there'll be a base fee part of the transaction and it will be burned, removed from existence. So you'll pay for your transaction, and there will be a base fee that'll be burned. However, miners are still in the picture because there's a tip that you can give to the miner. So you're going to have the base fee that's burned, but even during the time of high network activity, there still will be demand. So you have to pay a tip to the miner.
One of the biggest misconceptions about this update is that it's going to make Ethereum fees cheaper. I think this is not exactly true. It will make the fees more predictable. So you're not going to be paying ten dollars one second and twenty dollars in the next second! And also, hopefully, it's going to be lower than it is today, but it won't necessarily be cheap.
The most important part about this update is it's going to change the supply of Ethereum. Look at Eth right now! There's no max supply! Ethereum will continue to be printed. So prior to the update, this is what Ethereum supply will look like - up, up and up!
And, of course, in crypto, we don't want this! We want something with a hard cap or maybe something that is deflationary. But with this new update, when Ethereum is burned, we may see the supply of Eth is reduced.
Let say, for example, Ethereum is being printed. There still is no hard cap for Ethereum and this is not changing. But during time of high network activity, more Ethereum will be burned than created. This means the supply will actually reduce. However, it is important to note and clarify that EIP-1559 doesn't make Ethereum deflationary, but it makes it deflationary at times of high demand. Because, let's say there's a high demand and Ethereum is being burnt. Then all of a sudden, it cools off. People don't want to use Ethereum. It might start going up again.
The point I am trying to make is that we will not see Ethereum move up or down in one direction. It will go up and down along with the demand of the market.
So I don't know what will happen tomorrow to the short-term trader. Will it pump or dump? I don't really care! But long term I believe with high demand, with all of nft and defi, we will see overall the supply of Ethreum will reduce. It will make Eth rare, which may lead it to cross its all-time high.
