Ethereum (ETH) Price to Reach $5,000 as Onchain Metrics Indicate Strong Demand
The Ethereum network is experiencing a surge in activity, with investor demand, on-chain metrics, and network activity setting up ether (ETH) for a potential price increase to $5,000. This prediction comes from CryptoQuant analysts who have analyzed the latest data.
Ethereum Spot ETFs Attract Record Inflows
The Ethereum spot exchange-traded funds (ETFs) have seen an impressive 13-day inflow streak, reaching nearly $2 billion in cumulative net inflows as of Wednesday. Notably, these funds attracted their first billion from July to early December, but SoSoValue data shows that it took only five trading days for them to capture the next billion.
Increased Network Activity
The total daily transactions on the Ethereum network have been hovering around 6.5 million to 7.5 million in the past few months, compared to about 5 million throughout 2023. This significant increase in network activity indicates higher usage and demand for the network’s capabilities, reflecting growing adoption of decentralized applications.
Growing Deflationary Pressure
The total supply of ETH has reached its highest level since April 2023, with approximately 120 million tokens in circulation. However, the amount of ETH burned via fees has been increasing steadily since September, which can create deflationary pressure on the total ETH supply. As the network sees higher activity and demand, the burn rate increases, limiting the growth of ETH supply.
Greater Adoption and Deflationary Pressure
Higher network activity on Ethereum signifies increased usage and demand for the network’s capabilities, leading to greater adoption of decentralized applications. Moreover, it leads to a higher burn rate of ETH via transaction fees, which can create deflationary pressure on the total ETH supply. During periods of high activity, the burn rate can outpace issuance, resulting in a decrease in circulating supply.
ETH Price Prediction
According to CryptoQuant, ETH could reach its all-time highs from 2021 and beyond if current demand and supply dynamics continue. They note that the upper limit for ETH’s price stands around $5.2k based on the realized price – the average price at which holders purchased their ETH. This upper limit was previously reached in the 2021 bull run, but as new market participants buy ETH at higher prices, this upper price band continues to rise.
Ethereum Price Breakout
The recent surge in Ethereum’s price has significantly increased the total value of assets locked within its ecosystem, reaching $77 billion on Thursday. This is the highest level since January 2022 and demonstrates the growing adoption of decentralized applications. The lion’s share of these assets is managed by just three key applications:
- Lido: A liquid staking protocol holding over $38 billion in staked ether.
- Aave: A lending platform with $19 billion spread across various assets.
- EigenLayer: A restaking platform holding $18 billion.
Increased Activity Across Multiple Metrics
November has seen a notable uptick in several key metrics on the Ethereum network, including revenue, transaction fees, new wallet creations, and on-chain volume. This increased activity is indicative of heightened usage and adoption when compared to the quieter months from May to September.
DeFi Bull Run and Regulatory Uncertainty
Ether largely underperformed bitcoin and other major tokens since 2022 but saw a return in bullish sentiment after Donald Trump won the U.S. presidential elections in November, rekindling hopes for a DeFi bull run among investors. The anticipation of potential softening of regulatory pressures on cryptocurrencies has been a catalyst for increased demand for ETH and has propelled the growth of major DeFi tokens since early November.
CryptoQuant analysts conclude that these factors cumulatively set up ETH to retake its all-time highs from 2021 and beyond, with ETH potentially reaching $5,000 if current demand and supply dynamics continue. The growing adoption of decentralized applications and increased network activity are key indicators of a potential price increase.
