Ethereum’s native token, Ether (ETH), experienced a 20% rally between Jan. 8 and Jan. 11, although it struggled to maintain the $2,600 level. The subsequent correction of 3.5% to $2,560 on Jan. 16 may have disappointed some investors, but Ether’s price has outperformed Bitcoin (BTC) by 19.5% since Jan. 8, which is a rare occurrence that last happened in October 2022.
Investors in Ether are questioning whether the $2,500 level will hold, especially since the expected drivers in the short term, such as the Ethereum spot exchange-traded fund (ETF) and the planned Ethereum network upgrades, are not yet in place. From a bullish perspective, these events offer an opportunity for Ether to further separate itself from the rest of the cryptocurrency market. However, they also pose a risk if they backfire or experience delays.
It is not common for Ether to outperform Bitcoin by 15% or more in a week, especially in the past two years. In 2023, there was disappointment with Ethereum’s declining total value locked (TVL) and high gas fees, leading to the emergence of competing blockchains. Meanwhile, Bitcoin benefited from the anticipation of a spot ETF approval, particularly after BlackRock joined the race in June 2023.
The most recent instance of Ether outperforming Bitcoin by 15% occurred 14 months ago, when Ether’s price rose from $1,305 to $1,615 in the seven days leading up to Oct. 29, 2022. However, the gap closed in the following 11 days as ETH crashed below $1,100 on Nov. 9, 2022.
It is important not to rely on a single past instance as a guide for future prices, especially considering the downfall of the FTX exchange in November 2022. A counter-example is the 31-day period between July 13, 2022, and Aug. 13, 2022, when Ether’s price outperformed Bitcoin by 63%.
To determine whether Ether can hold the $2,500 support, one must analyze the activity on the Ethereum network, including its scaling solutions. The use of decentralized applications (DApps) is crucial to this blockchain, so a decrease in users and volumes indicates less demand for ETH. Over the past 30 days, the top Ethereum DApps have seen a 26% decrease in the number of active addresses.
However, Ethereum DApps experienced a 41% increase in volume over the past 30 days, driven by projects like Uniswap, Balancer, ParaSwap, and Aave. Even when excluding activity in Ethereum rollups, the base layer still dominates its largest competitor, BNB Chain, by a ratio of 6 to 1. This shows that criticisms of Ethereum’s high fees in the DeFi industry are exaggerated in terms of dominance.
In addition to the strong on-chain activity, Ether’s price could benefit from the “Dencun” hard fork, which aims to improve data availability and reduce costs for rollup transactions. Test implementations are expected to begin on Jan. 17. Furthermore, Bloomberg ETF analysts estimate a 70% chance of an Ethereum ETF approval by May, which further strengthens the bullish momentum and the $2,500 price support.
This article does not provide investment advice or recommendations. Readers should conduct their own research before making any investment or trading decisions.