Increasing use of the Ethereum network will strengthen the case for ETH’s price rally to $3K

Ether (ETH) rallied 16.2% on August 8, but struggled to hold above $2,600 on August 9. Despite encountering stronger-than-expected resistance at $2,700, Ether remains well-positioned to extend its bullish trend, bolstered by plenty of support. Favorable macroeconomic background and high activity on Ethereum network and layer-2 solutions.

Are Spot Ether ETF Flows Hindering ETH Performance?

Some investors argue that exiting EtherETFs has dragged down performance. However, this may change as the transition from Greyscale's ETHE device slows down. The fund has historically charged very high fees compared to its peers, and most investors were locked out early because the trust did not allow redemptions.

Grayscale ETHE recorded its lowest outflow at $20 million on August 8, according to Ethereum tutor Sasal, data from Farside Investors, suggesting the trend may be heading to zero. Greyscale's ETHE still holds $5 billion worth of ether, so even if flows stabilize in the near future, risk remains.

On a positive note, traditional financial investors are confident that the US Federal Reserve (Fed) is on track to cut interest rates in 2024. Markets that result in benefits by encouraging investment as lower capital costs reduce the need for fixed income returns. .

According to Bloomberg, Susan Collins, president of the Boston Federation, said: “The economy is growing as fast as I think it should to maintain that strong labor market.” Collins added that inflation is falling toward the Fed's 2% target, so the Fed will soon begin shifting to a less restrictive monetary policy.

Ethereum network data supports high price speed

Regardless of macroeconomic changes, the Ethereum network has made significant strides, paving the way for increased demand for Ether and reduced relative inflation as more ETH grows in competition for blockchain space. This bullish momentum is further supported by a 55% increase in decentralized application (DApp) activity on Ethereum over the past seven days.

Ethereum's surge in activity was led by Uniswap, a decentralized exchange (DEX), followed by 1inch Network and CoW swaps. Other notable contributors include Curve, Instadap, and Morpho Optimizers. Crucially, Ethereum's dominance in the DEX industry is unparalleled, with $21 billion in volume over the past 7 days, far more than rival Solana's $14.4 billion, according to Defillama data.

Ethereum's success peaked at 19.7 million ETH as of November 2022, a 9.4% increase in Total Value Locked (TVL) compared to the previous month. This growth has been driven by platforms such as Aave, Circuit Staking, Curve Finance, Magpie Ecosystem and Mellow Protocol, as reported by Defilama. In comparison, BNB Chain's TVL has remained stagnant at around 8.7 million BNB (BNB) for the past month.

The activity on Ethereum layer-2 solutions reaches a peak

Critics argue that Ethereum's average transaction fee of $3.85 will limit its adoption. However, this view is limited to its secondary scale solutions, including Base, Arbitrum, Blast, Optimism and Mantle, with a total of $11.7 billion in native TVL or $36.7 billion in bridge deposits, according to L2Beat data.

Related: Vitalik Buterin Moves $8M Ether To New Wallet – Future Donations Possible?

In fact, Ethereum layer-2 activity reached a peak on August 7, with an average of 318 transactions per second, driven by the growth of networks such as Xai, Base and Proof of Play, according to L2Beat. In summary, Ethereum's scalable solutions are now processing 24 times more transactions than the base chain, highlighting the success of recent improvements aimed at reducing the operating costs of deep restructuring.

Given the Ethereum network's strengthening in activity and deposits, Ether is well positioned to reclaim the $3,000 level in the near term, barring any significant external shock to investor sentiment.

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.