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The Ethereum network started facing congestion, which in turn resulted in very high gas fees being charged from users making transactions on the blockchain.
Analysts from American multinational investment bank and financial services holding company JPMorgan Chase & Co (NYSE: JPM) believe the price of Ethereum (ETH) is overvalued when compared with the utility emanating from the blockchain network at the moment. As reported by Business Insider, the price of Ethereum should be approximately $1,500, about 47.4% below the current price of $3,162.06 that Ethereum is worth at the moment.
Ethereum birthed the age of smart contracts being built on the blockchain. However, trailing the network’s pioneering work, hundreds of equally functional open-source blockchains have launched, all of which are providing a great deal of competition to Ethereum. For example, the team of analysts led by Nikolaos Panigirtzoglou cited the growing competition from the duo of Solana and Cardano in particular.
The analysts said they computed the price based on various factors including the number of miners and the supposed level of adoption.
“We look at the hashrate and the number of unique addresses to try to understand the value for ethereum. We’re struggling to go above $1,500,” Nikolaos said. “There is a question mark here. The current price is expressing an exponential increase in usage and traffic that might not materialise.”
Ethereum has maintained impressive growth in the face of a series of price corrections all year long. The coin is currently up 722.3% in the Year-to-Date period, and its market capitalization is currently pegged at $371.1 billion.
Ethereum Killers with Unproven Test
As the rate of adoption in the Ethereum blockchain grew, so also were challenges added to the network. Amongst the major issues, the network started facing congestion, which in turn resulted in very high gas fees being charged from users making transactions on the network.
The emergence of a number of blockchain networks was primarily centered on providing an alternative solution to Ethereum’s network woes. From Binance Smart Chain (BSC) to Polkadot and Solana amongst others, all promised to be the Ethereum killer, however, reality shows otherwise. While many have succeeded in taking Ethereum’s market share through a relatively lower transaction cost, many are still faced with the issues of scalability.
Many protocols have proposed various technologies to solve this scalability challenge, however, as the blockchain ecosystem veers into mainstream adoption, these solutions have proven insufficient to cushion the influx of millions of users across the board.
Ethereum Price Is Overvalued: Will ETH 2.0 Turn Things Around?
Recognizing its network’s challenge, the Ethereum Foundation has initiated the development of a more scalable Proof-of-Stake (PoS) protocol dubbed Ethereum 2.0. With the plans to switch its current Proof-of-Work model to this new blockchain infrastructure, the team believes all issues of scalability will be resolved in a sustainable way.
Despite the bearish price call on Ethereum, Jack O’Holleran, CEO at ethereum development company Skale Labs noted that Ethereum is still poised to be the dominant decentralized finance (DeFi) blockchain into the foreseeable future.
“The vast majority of smart contract developers are building in the ethereum ecosystem,” O’Holleran said. “Despite major partnerships being announced on other chains, we still see the absolute majority of (developers) being pulled into the ethereum vortex.”
With the emergence of ETH 2.0, the Ethereum blockchain may start experiencing a commensurate growth to complement its price growth.