Ethereum fundamentals signal $2,000 ETH price is closer than it seems


In the early hours of February 15th, the price of Ether (ETH) fell to $ 1,660, followed by a 9% rebound within 10 hours. The move caused $ 280 million in futures contracts to be liquidated, indicating increased leverage from long positions.

Although initial concern about the February 8th CME futures launch appears to have faded, persistent excessive transaction fees may have undermined investor confidence. Nevertheless, the fundamentals behind Ethereum remain strong, indicating that the ETH price should immediately recover from the final lows.

Average Ethereum Transaction Fee, in USD. Source: BitInfoCharts

Although the above scale can be interpreted positively, not every user can afford a $ 12 fee. A simple token swap on decentralized exchanges (DEX) can cost hundreds of dollars in gas fees, leaving small traders with no choice but to forgo the grid.

Several proponents are testing retail and layer 2 solutions to circumvent this problem, including Skale and Optimistic Network. Eth2 will use hashing to split the blockchain into several parts and increase the number of transactions the network can process at once.

Total value insured remains in an uptrend

The exponential growth of Total Closed Value (TVL) in decentralized financing projects cannot be ignored. The revised metric attempts to clean up the readings from ETH price increases, thus providing more reliable data.

Locked in total revised value, in US dollars. Source: DappRadar

As shown above, the 34% increase over the past 30 days is in line with the 38% ETH gain in February. Regardless of the transaction fees, there is still value generated by the automated market-making pool and betting mechanisms.

To understand whether the recent crash reflects a potential local top and a subsequent downtrend move, one needs more data. Besides price action and technical analysis, investors should also measure metrics on the chain such as using the grid. An excellent place to start is transactional and value transfer analysis.

ETH / USD (line) rate for transactions and transfers (region). Source: Currency Metrics

Coin Metrics data shows that 14-day average transactions and conversions rose above $ 9 billion in daily transactions, an increase of 32% from the previous month. This large increase in transaction value and conversion indicates strength and indicates that the Ether price is sustainable at current levels.

Currency withdrawals indicate long-term possession

Although there is no consensus among analysts about the short-term price effect of currency withdrawals, their effect is either neutral or bullish. Adverse movement, large continuous flows, is the only downward scenario, as it indicates a willingness of shareholders to sell.

ETH / USD price (black) versus net-flow ETH (red). Source: Cryptocurrency

From January 1 to February 15, nearly 600,000 ETH were withdrawn from exchanges. Regardless of whether the whales move to cold wallets or put Ether in the DeFi ecosystem, these coins are unlikely to be sold in the short term.

Given that this move occurred while Ethereum hit an all-time high of $ 1,870, the index indicates the confidence of its holders.

In conclusion, based on both the metrics on the chain and the trading perspective, there are encouraging signs that $ 2000 is on hand and dips are being bought hard.

The opinions and opinions expressed herein are solely of those of The authors They do not necessarily reflect the views of Cointelegraph. Every investment and trading movement involves risks. You must do your own research when making the decision.