DeFi
Why Ethereum is a Good Buy Right Now: Supply Squeeze, DeFi Boom and More!
Ether may lag behind Bitcoin this year, but Coinbase analysts believe the cryptocurrency has strong long-term potential and could surprise investors with a significant upside. In a research report released on Wednesday, Coinbase highlighted ETH’s resilience and growth potential in the rapidly evolving digital asset market.
Ether performance this year
Ether, the second largest cryptocurrency by market capitalization, is up 29% this year. While this is a solid gain, it falls far short of Bitcoin’s impressive 50% rise. The broader crypto market saw a 28% surge, indicating that while ETH is in line with the general trend, it has not outperformed the market.
Main drivers of Ethereum growth
Reduced fluid supply
Coinbase analyst David Han suggests that:
“Ether could have the potential to surprise on the upside in the coming months.”
It highlights the absence of significant supply-side pressures such as token unlocking or miner sales. A significant factor is the reduction in ETH liquid supply due to staking and the expansion of layer 2 solutions.
L2 staking and extension
The report focuses on several factors that could increase the value of Ethereum. First, staking and the expansion of layer 2 solutions have significantly reduced the supply of liquid ETH.
“Staking and Layer 2 growth have proven to be important and growing sinks for ETH liquidity.”
Second, Ethereum’s position as a cornerstone of the DeFi ecosystem remains secure through widespread adoption of the Ethereum Virtual Machine (EVM) and innovations in Layer 2 solutions.
DeFi Dominance
Another important factor is Ethereum’s key role in the decentralized finance (DeFi) ecosystem. Widespread use of the Ethereum Virtual Machine (EVM) and new developments in Layer 2 solutions ensure Ethereum’s continued importance.
The EVM enables the creation and execution of smart contracts, essential to DeFi applications, providing a solid foundation for the value of Ethereum.
“We believe the market may be underestimating the timeline and chances of eventual approval. »
Bullish technical patterns
Technical analysts have identified several positive trends that support a good outlook for Ethereum. A full bullish setup and rebound from the key 38.2% Fibonacci retracement support level around $2,800 are promising signs. Historically, this level often leads to higher prices during bull markets.
Understanding Market Sentiment
Ethereum’s previous peak above $4,000 is considered a major turning point, suggesting the start of a new long-term uptrend. Analysts like Titan of Crypto and JACKIS highlight these technical indicators as signs of an upcoming breakout.
Prominent cryptocurrency analysts are also bullish on Ethereum. CryptoYoddha predicts that Ethereum could surpass $10,000 by the end of 2024, citing strong on-chain supply momentum and strong DeFi fundamentals. Michaël van de Poppe expects significantly higher prices in the coming weeks, noting that ETH appears to be in the final stages of its correction.
Are you bullish or bearish on Ethereum’s long-term prospects?