Here’s Why Ethereum Could Surge After August 4th

Ethereum’s upcoming London hard fork on August 4 will limit supply and fees. Keep an eye on the Evolve Ether ETF (TSX:ETHR).

| More on:
You Should Know This

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn more

Ethereum, the second-most popular cryptocurrency, has lost roughly half its value this year. Each token is now trading at US$2,200 (C$2,800), far below its all-time high. However, a proposed upgrade to the Ethereum network that is scheduled to go into effect on August 4th could trigger another bull run. 

Here’s a closer look. 

Ethereum EIP 1559

Developers regularly consider proposals for enhancements, changes, and upgrades to the network. Ethereum Improvement Proposal (EIP) 1559 was introduced recently and has now been locked in for August 4th.

The proposal recommends a new way to handle fees on the network. It allows the network to burn some fees during every transaction to lower costs for users. That means using the network could get cheaper. However, it also means that some outstanding Ether will be regularly eliminated from circulation. 

Impact on valuation

There is currently 116 million Ether in circulation. Since its inception, the number of tokens on the network has only expanded. EIP 1559 changes that for the first time. Now, some tokens will be regularly eliminated. 

Meanwhile, demand for Ethereum-based applications has skyrocketed. There are more active accounts on this network than on Bitcoin at the moment. On June 28, there were 926,900 active addresses on the Ethereum network, compared to 618,900 addresses on Bitcoin. NFTs remain popular, while decentralized finance (DeFi) applications are as popular as ever. 

Effectively, Ethereum faces record-high demand just weeks away from an upgrade that could limit its supply. This imbalance could be the catalyst for Ethereum’s next bull run.

How to buy Ether

Canadian investors can add Ether to their portfolios easily. There are four Exchange-Traded Funds (ETFs) that hold Ethereum currently. The best is probably the Evolve Ether ETF (TSX:ETHR). 

Each unit of the fund represents 0.00362261, which is currently worth $9.96. Altogether, the fund has $41.3 million in assets under management. 

Evolve stands out because of its lower management fees (0.75%). With over $1.8 billion in assets under management, Evolve is one of the largest asset managers in the country. It was also the first to market with an ETH ETF. Since the fund qualifies for registered accounts, you could hold it in your Tax-Free Savings Account (TFSA) to minimize capital gains liabilities over the long term. 

This fund is a convenient option for investors looking to bet on the network before the big upgrade on August 4. 

Bottom line

The crypto industry is prone to boom-bust cycles. The price of popular tokens like Ether skyrocket for a year, decline sharply, and spend a few years range bound. That seems to be happening right now.

However, a major upgrade to the Ethereum network on August 4 could change the way fees and supply are handled. Not only will this make the network easier and cheaper to use, but it will also limit the supply of new tokens in circulation.

Meanwhile, demand for decentralized apps and financial products is expected to expand. This supply-demand gap could push the price higher.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

The Motley Fool has no position in any of the stocks mentioned. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned. 

More on Investing

Hands holding trophy cup on sky background

3 Growth Stocks That Could Be Huge Winners in the Next Decade and Beyond

Here are three top TSX growth stocks that may be worth a look, given the significant valuation declines these stocks…

Read more »

edit Back view of hugging couple standing with real estate agent in front of house for sale
Dividend Stocks

Why Real Estate Stocks Are a No-Brainer Addition to Your Portfolio

Real estate stocks, especially REITs, offer some distinct advantages over other types of stocks, making them must-have additions to most…

Read more »

Man data analyze
Stocks for Beginners

Beginners: 2 Market-Beating Stocks Just Getting Started

Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM) and Constellation Software (TSX:CSU) are proven market beaters that could continue their ways.

Read more »

oil and natural gas
Energy Stocks

Small OPEC+ Oil-Output Hike: Buy More Energy Stocks?

Energy stocks could soar higher, because oil markets will remain tight due to the small production increase by OPEC+.

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

3 Top TSX Dividend Stocks to Buy for Monthly Passive Income

Top TSX stocks with monthly dividends now trade at cheap prices for investors seeking passive income.

Read more »

edit Person using calculator next to charts and graphs

Where to Invest $500 in the TSX Right Now

Long-term investors can look to buy stocks, including Suncor Energy and Shopify, as they are poised to outpace the broader…

Read more »

Canadian Dollars
Dividend Stocks

Create Free Passive Income and Turn it Into Thousands With 1 TSX Stock

If you can't afford to invest, you can certainly create passive income another way and use that to invest in…

Read more »

falling red arrow and lifting

2 Oversold TSX Stocks That Should Bounce Back

Stocks that are oversold without an external catalyst like a market crash or a weak sector might be risky buys,…

Read more »