Ethereum maintains its status as one of the fastest-growing crypto assets. The token has added more than 30% since the beginning of the month. At the end of July, the ETH/USD pair was quoted at $2490. Now, it's steadily holding above $3200 with the potential for further recovery.
ETH was supported by the London hard fork launch, which contains the EIP-1559 update aimed at lowering ETH fees and network congestion. The long-awaited update was implemented at block 12,965,000.
It is worth noting that several deflationary blocks were mined during the hard fork. That is, the amount of burnt coins was greater than the miners' reward. Miners normally receive their reward in the form of new Ethereum coins. Thus, after the hard fork, Ethereum officially became a deflationary asset.
Some traders believe that Ethereum will not see any benefit from this event, given that Bitcoin, for example, has always been this way. We take a different point of view.
Indeed, the supply of Bitcoin is limited to 21 million coins. The mining process itself will naturally slow down after each halving, once every four years, until all the coins are mined. There are also coins to which private keys are lost, so these Bitcoins are basically gone. The idea that investors will keep losing their private keys makes BTC a deflationary asset. The big caveat though is that its deflationary properties will manifest themselves only in case of investor negligence.
Unlike Bitcoin, Ethereum's deflation is constant when the number of coins burned exceeds the amount being mined.
Market participants are confident that after the update, the ETH/USD rate will exceed $5000 by the end of this year. Over time, developers plan to further reduce the mining reward and optimize fees. After the transition to Ethereum 2.0, emission and transaction fees will be minimized. According to experts' forecasts, this may happen in the middle of next year.
The growth of Ethereum and the entire cryptocurrency market is also facilitated by the investor hopes for tax amendments and changes in crypto rules, which are now being discussed in the US Congress. According to the latest information, crypto supporters managed to convince the Senate to slightly change the bill's wording. Apparently, only companies that enable users to buy, sell and trade digital assets will be subject to tax reporting requirements.
The amendment would establish that the new reporting "does not apply to individuals developing blockchain technology and wallets." So, miners will be able to avoid tax liabilities for their activities. Against this background, we recommend considering long positions in ETH only, especially taking into account its potential for further growth above $5000.