ether surpassed the $ 4,000 level this morning ahead of the upcoming Ethereum Improvement Proposal (EIP) -1559 in July, data from multiple sources shows.
The world’s second largest asset by market capitalization ($ 470 billion) and arguably the most widely used blockchain (billions of dollars in transactions processed daily). The ETH’s circulating offering is 115 million and is trading at $ 4,130 at press time.
The price increase subsided $ 77 million worth of shorts the data tool Bybt shows. Liquidations for the uninitiated occur when leverage positions are automatically closed by exchanges / brokers as a “safety mechanism”.
Futures and margin traders who borrow capital from exchanges (usually in multiples) to place larger bets place a small amount of collateral before placing a trade. If the market moves against them, the collateral is strengthened and the position is said to be “liquidated”.
And these bets against Ethereum took on the brunt of the liquidations yesterday. Of the $ 77 million in liquidated capital, Bitmex traders lost $ 26 million while Binance traders lost over $ 11 million.
The largest liquidation was a $ 25 million Bitmex ETH trade.
Catalyst for burning Ethereum
The EIP-1559 is a cheap catalyst that drives up ETH prices. The proposal combats the problem of high gas charges and the network’s emissions rate by introducing a “burn” mechanism for all network transactions. This means that the network will automatically burn that amount when someone pays on Ethereum Gas.
This leads to a steadily decreasing supply of ETH and is even referred to in some circles as the “Ethereum scarcity engine”. Again, this is a favorable upcoming event for traders and investors as it would mean falling supply higher Prices as the demand for Ethereum increases / remains the same in the future.
Crypto research firms like Delphi Digital identified this growth in value back in August 2020. “Tie things together, EIP 1559 and stake out [create a] A symbiotic relationship in which not only the value in use increases, ”the company said in a report at the time
It added, “However, introducing cash flows to a larger group of participants to secure the network creates a more effective long-term value proposition [for ETH]. ”
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