Ethereum fundamentals signal $2,000 ETH price is closer than it seems

In the early hours of February 15, the price of Ether (ETH) fell to $ 1,660, followed by a 9% rebound in 10 hours. The move triggered liquidations of $ 280 million in futures contracts, indicating excessive leverage from longs.

Although initial concerns about the launch of CME’s ETH futures appear to have subsided on Feb. 8, persistent inflated transaction fees may have undermined investor confidence. Still, the fundamentals behind Ethereum remain solid, suggesting that ETH price should bounce back from any dips immediately.

Medium transaction fee from Ethereum, USD. Source: BitInfoCharts

While the above metric may be interpreted positively, not every user can afford a $ 12 fee. A simple token swap on decentralized exchanges (DEX) can cost hundreds of dollars in gas fees, leaving small traders with no choice but to get off the network.

Several proponents are testing sharding and layer two solutions to get around this problem, including Scale and Optimistic Network. Eth2 uses sharding to split the blockchain into multiple pieces and increase the number of transactions the network can process at the same time.

The locked total remains in an upward trend

The phenomenal growth of Total Value Locked (TVL) in decentralized finance projects cannot be ignored. The adjusted metric tries to clean up the measured values ​​of ETH price increases and thus provides more reliable data.

Adjusted Total Locked, USD. Source: DappRadar

As shown above, the 34% increase in the last 30 days is equivalent to the 38% increase in ETH in February. No matter the transaction fees, automated market making pools and staking mechanisms still create value.

More data is needed to better understand whether the recent crash reflected a potential local spike and a subsequent downtrend. In addition to price promotions and technical analysis, investors should also measure on-chain metrics such as network usage. An excellent starting point is analyzing transactions and transferring values.

ETH / USD price (line) vs. transactions and transfers (area). Source: Coin Metrics

Coin Metrics’ data shows that the average 14-day transactions and transfers are more than $ 9 billion a day. This corresponds to an increase of 32% compared to the previous month. This significant increase in the transaction and transfer value signals strength and suggests that the price of Ether is sustainable at the current level.

Exchange withdrawals indicate long-term participation

While there is no consensus among analysts about the short-term price impact of currency pullbacks, their effect is either neutral or bullish. The opposite move, large continuous inflows, is the only bearish scenario as it indicates the owners’ willingness to sell.

ETH / USD price (black) vs. stock exchange ETH net flow (red). Source: CryptoQuant

From January 1 to February 15, around 600,000 ETH were withdrawn from the stock exchanges. Whether whales move into cold wallets or add airwaves to the DeFi ecosystem, these coins are less likely to be sold in the short term.

Given that this move took place while Ethereum was making an all-time high of $ 1,870, the indicator shows the confidence of the holders.

In summary, based on both on-chain metrics and a trading perspective, there are encouraging signals that $ 2,000 is within reach and that dips are aggressively buying up.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.

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