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A thorough but balanced analysis of Ethereum’s current status, potential catalysts, supply and demand changes, etc., gives conservative but systematic optimistic thoughts on the question of “whether Ethereum price is about to take off.”
Ethereum has been quite disappointing in price performance since the start of this bull market.While Bitcoin has successfully broken through its all-time high, up more than 350% since its cyclical lows, Ethereum appears to be a bit behind.Its price action is slow, lacks clear catalysts, and has a relatively weak response when Bitcoin prices soar.
However, lately, it seems that we have witnessed a shift in market sentiment.Now, the question everyone is thinking about is: Is it time for Ethereum to finally show its light?
In today’s discussion, we will explore this crucial issue in depth.
But remember, no one can predict the future.So what follows is just some ideas, and ideas are particularly prone to change in the cryptocurrency space.As trading expert Peter Brandt perfectly expressed, “a firm view, but modest attitude.”
With this idea, let us explore it in depth.
1. The current status of the network is very potential
In order to thoroughly analyze the potential of Ethereum (ETH), it is first necessary to analyze the current status of the Ethereum blockchain.From a macro perspective, these factors make ETH valuable and attract investors.
1) Total lock value (TVL)
Activity in the Ethereum blockchain has been significantly restarted after a significant decline in total lock-in value (TVL) during the last bear market.TVL has risen by about 200% over the past year.While there is still some room for improvement to reach all-time highs, the upward trend is obvious.
Active addresses have shown strong resilience over the past two years, never below 300,000 even at bear market lowest points.This shows that Ethereum has surpassed the initial hype phase to become a mature blockchain that has withstood the test of time.
2) Value flow
Value flow, i.e., the revenue measurement of holders and pledgers, has also increased in the past rolling years.
3) Core developers
Core developers are an important indicator because ultimately it is the developers who build the future of blockchain.With more than 440 full-time developers, Ethereum is at the forefront of development activity, and this number is still on the rise, which means Ethereum is still very attractive to developers.
2. Some catalysts
In addition to on-chain indicators of healthy growth, Ethereum has many upcoming catalysts.Here is a list of some important catalysts:
1) Spot ETFs launched in the future
This is undoubtedly one of the most important catalysts for Ethereum.The unexpected approval of the Ethereum ETF reinforces the value proposition of cryptocurrencies as an established asset class and will create a new wave of demand for Ethereum.Given the success of the spot Bitcoin ETF, we have good reason to be excited.
Although it is difficult to accurately estimate the amount of potential funds flowing into Ethereum ETFs, we can draw a range of expected values based on the predictions of various experts.This gives different potential scenarios for net inflows in the first year, ranging from $1.39 billion to $6.93 billion.
2) The next step is to estimate the impact of these potential capital inflows on Ethereum’s price
Again, there is no easy way to do this, but one option is to make some assumptions based on the recent situation of spot Bitcoin ETFs and adjust for Ethereum for the following reasons:
Bitcoin’s circulating market value is currently about 3.15 times that of Ethereum.About 27% of Ethereum is pledged, meaning less circulation available for purchase and sale, while explosive price action may be more.Since the merger with The Merge, Ethereum’s supply has generally shown a depreciation trend (-0.184%).
Therefore, a reasonable assumption is that Ethereum is four times more reactive than Bitcoin, which means that for the same inflow, Ethereum’s price will change four times more than Bitcoin.
Based on all this, we can come up with different estimates about the price performance of Ethereum by the end of 2024.
3. Clarity of supervision
In addition to potential new sources of demand, the approval of spot ETFs also brings much-needed clarity to the status of Ethereum, a commodity.We all know that the market usually likes clear rules, so the more regulatory issues around cryptocurrencies, the better.
1) Dencun upgrade
This recent upgrade is very important to Ethereum.It brings several technological improvements that solidify Ethereum’s infrastructure, but one of the main features is that it significantly reduces transaction fees for Layer 2 networks by enhancing data availability.This is a key move to build Ethereum into a scalable settlement layer.
2) US presidential election
Cryptocurrencies have become an important topic in the upcoming elections.On the one hand, current presidential candidate Donald Trump has made clear support for cryptocurrencies.If elected, this could be a positive catalyst for cryptocurrency adoption, in favor of Ethereum.On the other hand, the Biden administration has made little clear on this issue, but has shown some signs of relaxation.Overall, the outlook is bullish.
4. Ethereum supply is restricted
After all, supply and demand are the only two variables that affect price.What we are facing now is that in addition to the various potential incremental demands explained earlier, Ethereum’s supply is also limited.This can be demonstrated from the deflationary situation of Ethereum supply since the merger.
In addition, the proportion of staking Ethereum has reached an all-time high and has continued to grow.This means less supply available for purchase and transaction on the trading platform, which also means that the market needs less demand to drive price movements, and therefore more potential for explosive price action.
5. Price action
In addition to the various catalysts mentioned above, the current situation in Ethereum is also very interesting.
Looking back, we can observe that after the bottoming out in June 2022, Ethereum consolidated sideways for nearly a year and a half before breaking through the first wave of gains entering the bull market.Now, Ethereum has formed a consolidation pattern near its past highest point, which has been going on for more than four months, and we are currently at some key resistance levels and there is the greatest degree of fear on the timeline.This may provide a potentially good buying opportunity for a medium- and long-term perspective.
The current ETH/BTC chart is also approaching a critical turning point.BTC dominates the long-term downtrend, but ETH/BTC has recently rebounded from multi-year lows and has shown strong momentum.If this momentum is maintained and ETH/BTC breaks through the downward channel, we can expect ETH to attract a lot of market attention.
Last but not least, now seems to be the time to start the Memecoin season.So far, this bull market has been driven primarily by Bitcoin, with a few exceptions.Currently, Memecoin is performing close to an all-time low compared to Bitcoin.However, we expect this trend to reverse at some point as investors turn their attention away from Bitcoin to Memecoin.This potential market rotation is in line with our current bullish preference for ETH.
6. Negative impact
Like everything in life, it is important to keep a critical eye.Therefore, when analyzing the global prospects of Ethereum, you should also pay attention to potential shortcomings, which may have negative impacts on Ethereum:
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Global market performance: Ethereum is very sensitive to overall market sentiment.If the overall trend of the entire cryptocurrency market is downward, Ethereum will not be performing well.Although this is not the scenario we expected, it is still worth noting.
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ETF expectations: Negative surprises on ETFs, such as net inflows and poor interest generated, may have a negative impact on Ethereum in the short term.
The traditional financial world’s understanding of Ethereum is more difficult than Bitcoin: when the spot Bitcoin ETF was launched, Bitcoin was promoted as digital gold, and it is easy for the traditional financial world to understand this narrative.But for Ethereum, the situation is different, and there is no clear consensus on its value proposition.Some people regard Ethereum as a global computer, some people regard it as a Web3 app store or a decentralized financial settlement layer, etc.Confusion about what Ethereum is really about may make it more difficult for the traditional financial community to allocate Ethereum in its portfolio.
Ethereum vs. Next-generation blockchain: Ethereum has been widely criticized for its slower speed and higher cost, especially compared to newer blockchains.In this regard, there are two perspectives.On the one hand, some believe this will lead to a slow decline of Ethereum, while others believe this is not a problem because it uses Ethereum as a settlement layer for building and creating scalable infrastructure at other levels.No matter which side of the debate you are on, it is important to keep an open mind.
7. Summary
Ethereum was lagging behind at the beginning of this bull market, but it seems that it is in an interesting moment.
The current state of its blockchain is expected and solidifies its development as a mature L1 blockchain that has stood the test of time.Furthermore, Ethereum has several bullish catalysts in terms of demand and supply, and current price action is consistent with these factors.
However, as it has been the case all along, things are rarely black and white, so it is important to maintain awareness of potential shortcomings that may have a negative impact on Ethereum.
Author: Plain Language Blockchain
This article is the view of the columnist who joins PANews, and does not represent the position of PANews and does not assume legal responsibility.Articles and opinions do not constitute investment opinions.
Image source: Baihua Blockchain If there is any infringement, please contact the author to delete it.
depthCryptocurrencyBTCETFETHInfrastructureDecentralization
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