Is A Low ETH Price Actually Better For Ethereum?
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The market is still reeling from last month’s bloodbath. What looked like the beginnings of a potential bull breakout at the start of the month descended into a frenzied sell-off midway through.
It’s a mixed picture on the markets this morning. Yesterday’s shock rally added $7bn to the market, although it fell back to $112bn by press time.
Few would have thought to see Bitcoin (BTC) back down below $4,000, Litecoin (LTC) at $25 and Bitcoin Cash (BCH) treading water at just above the $100 mark. A price slump affects a payment coin’s utility, simply because less can be bought with it.
But for cryptocurrencies that are not designed as payment solutions, the market sell-off may have only had a limited impact on the fundamental utility of the project. Ether (ETH), which is used to fuel transactions on the network, is, in itself, not designed for external payments.
That’s confirmed by network activity, which has remained relatively constant even with the sharp drop in prices. Even though ether tokens are now worth half of what they were at the beginning of November, activity hasn’t changed much since the beginning of September. Since October 1st, the daily number of transactions has been bracketed between 500,000 and 600,000.
What’s the best Ether price?
There are clear advantages to having cheaper ethers. It makes it more accessible to transact on the network and easier for developers to build functions on the platform. Projects complained in the past that the cost of drawing up an Ethereum smart contract was prohibitively expensive. When ether reached its peak price at around $1,400, a single transaction could cost as much as $9. At its current price, which at the time of writing came in at $92.50, the transaction fee would be more like $0.50.
But not everyone completely agrees. Mati Greenspan, senior analyst at eToro, said to Crypto Briefing that a stable Ether price would be more beneficial than a low one. “When the price remains stable it’s ideal for developers because they can understand best what they’ll be paying for gas and plan accordingly,” he said. “If it’s low, they will need to estimate the costs that could likely rise in the future. It makes budgeting difficult.”
There is always the off chance that ether could rise to where it was in January. Ethereum developers need to consider this as they commit tokens to the network. A stable price makes it easier for developers to make accurate long-term projections and plans.
The author is invested in BTC and ETH, which are mentioned in this article.
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