Ethereum Fundamental Shows ETH Price Closer to $2000


Ethereum fundamentals, both on-chain and trading metrics indicate Ether dips are meant for buying as $2,000 ETH price is closer than it seems.

February 16, 2021 | AtoZ Markets – Ether prices plummeted to $1,660 on February 15 and then recovered sharply by 9% within 10 hours. The move triggered the liquidation of a $280 million futures contract, which showed excessive leverage from long positions.

Initial concerns about the Chicago Mercantile Exchange (CME) ETH futures, which began on February 8, seem to have diminished, but continued excessive transaction fees may have undermined investor confidence. That said, the fundamentals behind Ethereum remain solid, and ETH prices can be expected to recover quickly from the decline.

Ethereum median transaction fee, USD. Source: BitInfoCharts

The chart above shows that it costs about $12, but not all users can pay as much as $12. Token swaps on decentralized exchanges (DEX) cost hundreds of dollars in gas charges (commissions), forcing small traders to abandon their networks.

To solve this problem, we are currently testing sharding and second layer (Layer 2) solutions. Ethereum 2.0 uses sharding to solve blockchain scalability issues.

TVL maintains upward trend

Total Value Locked (TVL), a measure of asset inflows in decentralized finance (DeFi) projects, continues to rise. With this TVL, the upward trend can be read even with the “adjusted TVL” that excludes the current rise in Ethereum prices.

Adjusted total value locked, USD. Source: DappRadar

As shown in the figure above, it has risen 34% in the last 30 days, which is consistent with the 38% rise in Ethereum prices in February. Despite soaring transaction fees, AMM (Automatic Market Maker) and staking mechanism continue to create value.

More data is needed to understand whether the recent Ethereum price plunge will lead to potential local tops and subsequent downtrends. In addition to price action and technical analysis, investors also need to evaluate on-chain indicators such as network usage. It’s a good idea to start by analyzing transactions and remittances.

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

According to Coinmetrics data, the average daily transaction value and remittance amount for 14 days has increased by more than $ 9 billion per day, up 32% from the previous month.

This significant increase in transactions and remittances is a signal of strength, indicating that Ether prices are sustainable at current levels.

Long-term holding tendency

On the other hand, a large inflow to the exchange is a bearish scenario as it shows the tendency of cryptocurrency holders to sell.

ETH / USD price (black) vs. exchanges ETH reserve (red). Source: CryptoQuant

About 600,000 ETH were withdrawn from the exchange from January 1st to February 15th. It’s unclear if whales (large investors) will move to cold wallets or deposit Ether into the DeFi ecosystem, but it’s unlikely that they will be sold in the short term.

This is a bullish trend, given the move that took place while Ethereum hit a record high of $1870.

In conclusion, both on-chain and trading indicators signal that Ethereum is close to $2000 and that dips are being bought up aggressively.

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