Ether (
ETH
) recently approached the $2,400 resistance level but was unable to break through, leading to a retest of the $2,120 support level. However, investors are now growing more confident in surpassing this level and venturing into uncharted territory not seen since May 2022 when the Terra ecosystem collapsed. On December 22, Ether saw a 4% increase, while Bitcoin (
BTC
) and BNB (
BNB
) remained relatively stable.
While the focus is currently on the exchange-traded fund (ETF) narrative as the main driver of recent cryptocurrency gains, there are several reasons supporting the surge in Ether’s price that could potentially push it above $2,500 before the expected ETF approval in mid-January, although the United States Securities and Exchange Commission (SEC) may take until March.
Instead of trying to predict the future, which is a difficult task in the fast-paced cryptocurrency industry, it is more prudent to analyze recent trends that are influencing the demand for Ether. One way to do this is by looking at the activity of decentralized applications (DApps) as an indicator. For example, examining DApp volumes can provide insights into different sectors that may not require a large total value locked (TVL), such as nonfungible token marketplaces, games, layer-2 bridges, and social networks.
In the last seven days, Ethereum DApp volumes reached $27.8 billion, representing a 14.2% increase from the previous week. This growth was driven by a 21% gain in Uniswap volumes and a 52% gain in Balancer volumes. In contrast, BNB Chain’s volumes for the same period were $4.5 billion, while Arbitrum accumulated another $5 billion. Notably, Ethereum was the only blockchain among the top six to experience an increase in volume in the past week.
To put this into perspective, Solana (
SOL
) would need to increase twelvefold to reach half of Ethereum DApps’ current transaction volume. Generally, 20% of users account for 80% of the volume, and this holds true for DApps as well. Considering Ethereum’s first-mover advantage and significant treasury for ecosystem development support, it is unlikely that another blockchain will surpass Ethereum in the short to medium term.
Additionally, no other blockchain can match Ethereum’s protocol, which generated $95.4 million in fees in the last seven days. This data indicates significant potential for increased activity following future updates, such as the ‘DenCun’ update scheduled for January, which aims to improve processing capacity and reduce costs.
The approval of the Ether spot ETF will differentiate Ether from other cryptocurrencies in terms of regulation. Competitors have only been mentioned nominally by regulators in recent court cases against exchanges that face charges for offering securities brokerage and services without proper registration.
Investors should also consider the positioning of Ether derivatives traders, particularly large investors and market makers. The Ether futures premium, which measures the difference between two-month contracts and the spot price, is currently at its highest level in over a year. In a healthy market, the annualized premium typically falls within the range of 5% to 10%.
The current 13.5% Ether futures annualized premium suggests that traders are not assuming the approval of the spot Ether ETF. During times of widespread excitement, this indicator tends to exceed 20% due to increased demand for leveraged long positions, causing price distortions relative to the spot market. This data implies the potential for a positive price impact if the ETF is approved, whether in January or March.
Based on Ethereum’s network activity and the indicators from Ether derivatives traders, it appears that investors should not be swayed by contenders gaining momentum unless these contenders pose a genuine threat in terms of volumes and deposits. Furthermore, the ETH derivatives indicator shows that professional traders are bullish despite Ether’s price nearing its highest level since May 2022. This suggests that investors have confidence in Ether’s ability to break above $2,500.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.