Ethereum has been a stand out star in the crypto market in 2020. Even with the recent over 15% collapse, the top-ranked altcoin is up over 200% year to date and 350% from the Black Thursday bottom.
Since then, though, Ethereum has taken on a completely new life, it seems, driven by DeFi and escalated by the surge in Uniswap tokens. But all this usage has clogged up the Ethereum blockchain and caused fees to reach unrealistic levels for everyday transacting. It’s caused some investors to avoid transacting in ETH at all, which could create a “gloomy” future for the smart contract focused cryptocurrency.
Ethereum Fees Reach Astronomical Levels, Discourage Usage of Cryptocurrency
The decentralized finance boom has propelled crypto back into the limelight and potentially a bull market.
Each passing week a new DeFi token was soaring only further fueling the sudden surge of interest in the seemingly unstoppable trend. The DeFi market may have reached its boiling point after ERC-20 token swapping service Uniswap began listing a flurry of food-related tokens.
These fresh out of the oven DeFi tokens were farmed by Ethereum holders, but tokens like Hot Dog and Pizza were sold down to nearly zero.
The enormous appetite the market has had for these types of DeFi tokens has resulted in Ethereum fees reaching crippling numbers.
Related Reading | Pizza & Hot Dogs: How Uniswap’s Profit Buffet Can Burn Crypto Investors
The demand for Ethereum only grew as these investors were forced to pay high gas prices if they wanted to get in on the hottest new token. Sadly, as they did, many got badly burned in the process – both by falling asset prices and by astronomical ETH fees.
The high fees have prompted several crypto community members across a wide range of credentials to speak out. One such individual, Blockfyre’s Simon Dedic warns that if ETH 2.0 doesn’t fix the outrageous gas prices, Ethereum’s future may be “gloomy.”
I spent like 800 USD in transactions fees for few trades today.
Furthermore, I lost around 10k USD when trying to sell today, because a tx with lower nonce didn’t go through for 3h.$ETH 2.0 has to come ASAP, otherwise I feel gloomy about its future..
— Simon Dedic (@scoinaldo) September 2, 2020
Why The DeFi Craze May Bring a Stormy, Gloomy Future To The Top Ranked Altcoin
Dedic isn’t alone. Several pseudonymous traders expressed their distaste in the situation and spoke of how they outright avoided making transactions because Ethereum fees are currently so high. Even Binance is cracking jokes on the subject on social media.
Although Ethereum has enjoyed a strong 2020 thanks to soaking up the DeFi limelight, things could turn dark on the altcoin extremely quickly.
The recent crypto market selloff has crushed just about any recently minted DeFi tokens and set Ethereum back nearly $100. And things may only just starting. With a high-risk presidential election ahead int he US, investors are de-risking into the dollar.
ETHUSD Daily Potential Downside Targets | Source: TradingView
Making matters worse, losses are only worsened in these DeFi tokens, due to the requirement of swapping back into Ethereum before cashing them out directly. Because fees are so high, investors may be encouraged to sit in positions, leading to severe losses as these new tokens fall to nothing.
It’s the risk these crypto insiders apparently knew they were taking, but either was blinded by greed or simply didn’t care.
Related Reading | This Signal Says Ethereum Could Lead Alts Off A Cliff
Ethereum devs will need to find and implement scaling solutions quickly, or the future of the altcoin could be at risk. Plenty of platforms have been poised as the Etehreum-killer, but in the end, it could be death by suicide due to high fees during peak usage.
15$ Fees for 50 $USDT payment
The future of money 🙃
Wondering when this Uniswap shit will end😑 pic.twitter.com/x61j9c7BVD
— Feras_Y (@FeraSY1) September 3, 2020
It’s gotten so bad, that dollar-pegged stablecoins built on the Ethereum blockchain can cost nearly $15 just to send $50 in USDC or Tether. The fees alone destroy the use case of other assets built on Ethereum. And this could lead to an extremely gloomy future for Ethereum.