Ethereum Eyes $1700 Levels As Grayscale Adds Another ~$76 million Worth ETH

In a massive rally over the last 48-hours, the Ethereum (ETH) price has moved past $1650 levels and is now eyeing a move above $1700. The massive rally comes as the institutional purchases by Grayscale shoot sharply in the last two days.

After adding $38 million worth of ETH on Tuesday, February 2, the Grayscale Ethereum Trust (ETHE) buys another $76 million worth of ETH on Wednesday, With this, Grayscale’s total Ethereum (ETH) holdings have now crossed 3 million with net asset under management for ETHE at $4.7 billion.

In the last two days, ETHE has scooped more than 72,000 ETH from the open market investing over $100 million in the world’s second-largest cryptocurrency, as per data on Bybt.com. The share price of the Grayscale Ethereum Trust (OTCMKTS: ETHE) has also gained over 30% in the last two days. At press time, ETHE stock is trading at $18.89 per share.

Grayscale: Ethereum Network Activity To Create “Positive Feedback Loop” for Ether

The world’s largest digital asset manager Grayscale is positive on the proposed EIP-1559 network and burn mechanism. The fund manager believes that if Ethereum network activity continues to increase, this can create a positive feedback look.

In its fresh report dubbed “Valuing Ethereum” released earlier today, Grayscale notes that the proposal can lead to ETH burning at a rate that exceeds the new ETH supply. This can ultimately lead to a supply crunch driving prices higher.

The EIP-1559 was first proposed by Ethereum co-founder Vitalik Buterin along with Ethhub co-founder Eric Conner, two years back in April 2019. It proposes a “base fee” that will be burnt to execute ETH transactions in addition to the miner fee. Based on the network variations in the network activity, the “base fee” will also vary while maintaining some balance of the gas prices. The Grayscale report notes:

“If activity increases and the supply of Ether decreases due to burning, a supply and demand curve would indicate an increase in the unit price of Ether because each unit would need to satisfy a greater proportion of economic activity. If EIP-1559 is implemented, it would institute a consumption mechanism that should serve as a positive feedback loop for Ether’s price.”

Interestingly, Grayscale’s comments come a day after JPMorgan said that the CME Ether Futures can lead to “negative price dynamics” for ETH. Buterin has recently proposed once again the introduction of a “base fee” during December 2020.