As a seasoned researcher with over two decades of experience in the financial markets and blockchain industry, I find Krueger’s analysis compelling but not entirely convincing. While it is undeniable that Ethereum’s fee revenue has significantly decreased this year, attributing this to a “death spiral” seems premature.
Analyst Fred Krueger has raised concerns about Ethereum, the largest alternative cryptocurrency, suggesting it may be in a “downward spiral” due to its fee revenue generation. In his examination, Krueger contrasted Ethereum’s performance against Bitcoin.
Krueger: “Ethereum’s feeodel is broken”
Krueger’s examination stemmed from a news piece shared within the community about Ethereum experiencing a significant decrease in its daily income. As per the latest report, Ethereum’s daily earnings have dropped by more than 90% compared to the start of this year (2024), reaching an all-time low for altcoins.
Notably, Krueger believes that Ethereum’s fee model cannot support the network’s current valuation and remains very weak. According to him, the current daily $200,000 fee revenue only amounts to about $73 million in one year. Krueger emphasized that this does not translate to either profit or revenue for Ethereum but just total transaction fees in the ecosystem.
Krueger argues that the current fee doesn’t cover the inflation cost brought about by ETH validators, making it impossible to justify Ethereum’s $300 billion market capitalization based on this factor alone.
He clearly pointed out that the current “fee revenue” estimate appears to be significantly off the mark. A figure near $3 billion might be a more reasonable expectation, and some might contend that this is still an underestimation.
Is Ethereum fee decline a sign of growth?
Krueger drew an intriguing parallel between Bitcoin and gold, suggesting that their values originate from being digital and physical currencies respectively, with both supported by substantial effort or labor (“hard proof of work”). He posits that investing in Bitcoin while selling Ethereum could bring a sense of satisfaction to an investor.
However, Ryan Watkins, cofounder of SyncracyCapital, disagrees with Krueger’s submission. Watkins argues that Ethereum will reach a new high in its on-chain activity, while fees have dropped by about 90%, indicating a bullish sign.
“The faster fees per transaction trend towards zero the better,” he insisted.
Watkins emphasized that fee reduction will facilitate the onboarding of billions into the crypto space through Ethereum, which guarantees its growth and utility. At the time of writing, data shows ETH trading at $2,491.97, which represents a 0.86% drop in price.
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2024-09-03 17:45