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On Monday, markets continued to recover after losing grip and falling into an overextended sell-off on Saturday after fear exacerbated by various variants seemed to overcome the crypto community’s hodl patience.
Most notably, one could not fail to notice how the “least volatile” crypto asset, Bitcoin led in the shed, losing far more value than Ethereum in less than four hours.
Moving onto Sunday, Ethereum seems to have recovered even faster, leaving a large bearish rejection wick which signifies strong bullish pressure even as Bitcoin’s price continues to remain in the grey area.
This disparity in price movement does not however come to some Ethereum supporters as a surprise.
High Gas Fees Ward Off Sellers
Ethereum has by far remained one of the most expensive networks to transact on and as such, the failure to witness a massive sell-off is believed to have been tied to the huge transaction fees involved which to some is a blessing in disguise.
“Ethereum not dumping as hard as Bitcoin, because you can’t sell due to high gas fees? Probably the greatest feature of the protocol…Great design VitalikButerin… So maybe you should raise Gas fees even higher so no one ever can sell again.” Said a tweep by the name Carl Menger.
True to his statement, during the first two hours of the Saturday sell-off on Ethereum, on-chain data showed that most ETH remained on exchanges despite the cryptocurrency asset experiencing some minor sell-off at the onset of Bitcoin’s plunge. However, in just under one hour, 1,875 ETH ($7,341,454) had been removed out of circulation ramping up the EIP-1559 burn.
Users Ditch Ethereum Mainnet For L2/3 Systems
The difficult decision to sell as experienced yesterday describes why most Ethereum Layer 1 users are migrating onto layer two networks built on the blockchain in an attempt to cut down on transaction costs.
In the past year, the number of users migrating to layer two systems has risen steadily with the Total Value Locked (TVL) currently standing at 1,446,107.91 ETH (Approximately $5.8 Billion)
Arbitrum, a third-generation layer-two optimistic rollup protocol that enables Ethereum users to settle their transactions away from the Ethereum mainnet is by far the largest with $2.36B of TVL.
According to data from L2BEAT, whereas more users continue to onboard Arbitrum since its launch late last year, in the past one week, beginning November 30, selling activity on Arbitrum have surged, denoting Ethereum users are much more comfortable transacting on the protocol due to its favorable fees.
Meanwhile, Saturday’s drop shows that most Ethereum users chose to scoop more coins at lower prices which have brought Ether’s market cap dangerously close to that of Bitcoin, igniting hopes of a flippening happening soon. At press time, Ether’s market cap is over 50% that of Bitcoin at $481 Billion.