As usual, the crypto market is keeping everyone guessing what could happen next. After an impressive run prompted mainly by the approval of 11 Bitcoin spot ETFs by The U.S. Securities and Exchange Commission on January 10, Bitcoin has experienced a rather steep decline to $42,555. But for better or for worse, the flagship crypto continues to stay in the lead, light-years ahead of the other coins in the market. So, at least when it comes to the first positions in the crypto hierarchy, there are no surprises on the horizon.
Ethereum, on the other side, has us wondering. The beginning of the year hasn’t been particularly eventful for Ethereum, with the altcoin stabilizing in a narrow price range between $2,400 and $2,500. This steady trajectory was only briefly interrupted by a quick surge on January 12th when the ETH price got close to the $2,700 mark, a value it last reached in May 2022. So, then what’s all this talk about Ethereum heading for 3K?
Although the primary altcoin seems to have entered a period of stagnation, there are many developments that could change its fate, starting with speculations over potential Ethereum ETF approval in May, the numerous upgrades and updates outlined in Ethereum’s roadmap for 2024 and talks about reviewing gas fee limits. Any of these events can cause Ethereum to break out of its horizontal area and push it on an ascending resistance trend line that could see the asset jump beyond the 3K threshold.
A gas fee review in sight
Vitalik Buterin, Ethereum’s co-founder and one of the most prominent figures in the crypto sphere, makes regular public appearances where he discusses Ethereum’s current state as well as potential plans for the future.
In his most recent dialogue at the 11th Reddit Ask-Me-Anything (AMA) session on January 10, Buterin started a conversation about Ethereum gas limits, suggesting that a slight increase of 33% might be in order. Ethereum’s gas limit has increased gradually over time but the Canadian programmer pointed out that it has remained unchanged for almost three years, so a rise could potentially help the network improve its performance.
According to Buterin’s calculations based on Moore’s law, an increase to 40 million from the current 30 million gas limit would suffice. The proposal was met with positive reactions in the crypto community which indicates it might soon be put into practice.
Ethereum gas limit explained
To gauge the importance and impact of Buterin’s proposal one has to understand the concept of gas limit and the role it plays in the network’s architecture. Gas represents the fees users pay to perform any action on the Ethereum blockchain like conducting transactions or executing smart contracts. Gas fees are denominated in gwei, with the standard transaction fee standing at 21,000 gwei.
But why is there a gas limit in place? The gas cap exists to determine the maximum amount of gas that can be consumed on processing a transaction or using a smart contract, limiting the number of actions that can be executed per block. While simple transactions require less computational effort and therefore come with lower gas fees, more complicated ones involving smart contracts entail more work which increases the gas fees.
The gas limit ensures that the blocks don’t get excessively large and hinder the network’s efficiency and performance. After switching from a Proof of Work (PoW) to a Proof of Stake (PoS) consensus mechanism, validators have also been given the opportunity to amend the gas limit so that it reflects the gas capability of the majority.
So, what could an increase in gas limit do for Ethereum? Rising the gas cap would allow for more transactions to be processed within the same block, reducing overall costs and boosting the platform’s scalability and throughput.
Could an increase to 3K be in the cards?
While Vitalik Buterin’s proposal has yet to be implemented, it has caused quite a bit of a stir in the market, contributing to an optimistic outlook for the altcoin. Shortly after the AMA session, the coin’s price jumped by 14%, rising above $2,600. Although Ethereum couldn’t sustain the price increase and fell back to $2,500, this proved that a bit of enthusiasm could go a long way in pushing the coin forward, so a run to 3K is not in the least unrealistic.
The price increase scenario could repeat itself in the future, as there are several factors that could turn Ethereum bullish. The SEC finally giving the green light for the first batch of spot Bitcoin exchange-traded funds represents a major milestone for the crypto industry and that can positively influence all the coins in the market, especially the ones that are already enjoying a high degree of popularity. Many believe that this decision has paved the path for the approval of a spot Ethereum ETFs that might come up in May. Speculations around the launching of a spot Ethereum ETF can kick off a new bull run for the altcoin in the months to come.
Then there’s the multitude of upgrades and improvements that Ethereum has in store for 2024, as detailed in the network’s roadmap. The Merge, the Surge, the Scourge, the Verge, the Purge, and the Splurge are all important upgrades to look out for this year as they focus on addressing some of the existing shortcomings and further Ethereum’s development and progress. With the platform becoming stronger, these advances can also serve as the driving force behind a future ETH price increase.
Final considerations
Although there is no certitude about what might happen to Ethereum in the future, reaching the $3,000 price point seems like the most probable scenario at the moment. Of course, it’s also important to keep an eye on internal and external factors that could influence Ethereum’s performance and trajectory to gain a more rounded view of potential price movements.
Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.