3 reasons why Ether (ETH) can collect more than $2,500
Ether (ETH) last approached the $2,400 resistance on December 9 but failed to break through, leading to a retest of the $2,120 support level. At this point, investors are gaining confidence in moving past this stage, entering unseen territory before the collapse of the Terra ecosystem from May 2022. On December 22, Ether stood out with a 4% increase, while Bitcoin (BTC) and BNB (BNB) remained largely unchanged.
The focus is on the exchange-traded fund (ETF) narrative, which could push it above $2,500 ahead of the ETF's approval in mid-January. The United States Securities and Exchange Commission (SEC) may take until March.
Ethereum network DApp sizes and protocol fees
Rather than trying to predict the future, which is a challenging task in the fast-moving cryptocurrency industry, it is wiser to analyze recent trends affecting demand for Ether using decentralized applications (DApps) activity as an indicator. One can start by examining DApp volumes, as some sectors do not require a large Total Value Locked (TVL), such as invulnerable token marketplaces, games, layer-2 bridges, and social networks.
Ethereum DApp volumes reached $27.8 billion in the past seven days, a 14.2% increase over the previous week. This growth was driven by a 21% increase in Uniswap and a 52% increase in Balancer volumes. In contrast, BNB Chain volumes reached $4.5 billion during the same period, while Arbitrum raised another $5 billion. More importantly, Ethereum was the only blockchain among the top six to experience an increase in volume over the past seven days.
To give some perspective, Solana (SOL) would need to increase by 12x to reach half of the current transaction volume of Ethereum DApps. Overall, 20% of users account for 80% of the volume for DApps. Given Ethereum's first-mover advantage and large treasury to support ecosystem development, the odds don't favor flipping in the short to medium term.
Additionally, no other blockchain can match the Ethereum protocol, which generated $95.4 million in fees, not including Bitcoin, which is not a direct competitor in the DApp ecosystem. Apart from promoting network security, this information shows great potential for future updates, including ‘DenCun', which aims to increase processing capacity and reduce costs.
The approval of the Ethereum Spot ETF is not valued as in the derivatives markets
The eventual approval of the Ether Spot ETF sets Ether apart from other cryptocurrencies in terms of regulation. Competitors were named in a recent court case against the exchange, which faces charges of offering securities brokers and services without proper registration.
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Finally, investors should evaluate the positioning of ether derivatives traders, especially large investors and market makers. Ether futures premiums, measuring the difference between two-month contracts and the spot price, hit their highest level in more than a year. In a healthy market, the annual premium, or base rate, typically falls in the 5% to 10% range.
The current 13.5% annual premium for Ether futures suggests that traders are not taking the Ether ETF license for granted. During periods of broad euphoria, this indicator tends to exceed 20%, which increases the demand for long positions, resulting in price distortions relative to the spot market. This data indicates that there could be a positive price impact if approved in January or March.
Based on Ethereum's network activity, Ether investors should not be discouraged from competitor pressure, at least until these competitors pose a real threat to volume and deposits. ETH Derivatives Indicator gives a clear indication that professional traders are bullish even though the price of Ether is nearing its high since May 2022.
This article does not contain investment advice or recommendations. Every investment and business activity involves risk, and readers should do their own research when making a decision.
