Compared to a rather lackluster 2023, cryptocurrencies have had a much better run in 2024, with most tokens experiencing a notable price appreciation in the first months of the year. Ethereum recently broke above the $3K threshold for the first time in almost 2 years and the rally is showing no signs of stopping. As usual, the price rise was fueled by a multitude of factors that have come together against a backdrop of a recovering crypto industry, and many take this as a sign of further growth that could help the top altcoin inch closer to a new record high.
Bitcoin is also making progress, trading at $56,598, up by 32% in the past month. At the time of writing, the Ethereum price was standing at $3,228, after a 41% increase over the past 30 days, and the question on everyone’s minds right now is what could happen next. As Ethereum manages to hold well above this crucial resistance level, experts are trying to decipher the intricate web of factors behind this uptick and cast predictions about the altcoin’s future.
A favorable context for Ethereum
Although some factors have greater influence than others, upward trajectories in the crypto market are usually not triggered by a single event, but by a combination of elements that happen to set the scene for sustained development. This is also the case with Ethereum’s recent price surge to new yearly highs. The rising trend was the result of several stimuli, most notably the ongoing tech upgrades that are set to unlock scalability and improve the network’s performance, a growing ecosystem of applications built atop the Ethereum blockchain and growing interest from institutional investors.
Since there are various forces at play here, it’s worth addressing them separately. First, there’s the upcoming Dencun upgrade which has been keeping Ethereum developers busy for the last few months. The first steps toward implementation have already been taken with the successful launching of the upgrade on all three test networks. The official date for the release of the Dencun upgrade on Ethereum’s Mainnet is scheduled for March 13 and there are high hopes surrounding the event.
The most important feature of this upgrade is represented by the Ethereum Improvement Proposals (EIP) 4844, better known as proto-danksharding or the Shanghai upgrade. This focuses on using data blobs as a temporary storage mechanism meant to reduce the data processing burden on Layer-2 rollups and thus increase transaction capabilities, speed and affordability. The upgrade will likely attract more users and increase activity on Ethereum’s network which is beneficial to its development.
Previous upgrades have also contributed to the current price appreciation. Since the completion of the Merge which consisted in the transition to a Proof of Stake (PoS) consensus mechanism from the former Proof of Work (PoW) model, staking activity on the network has increased considerably and that caused investor confidence to soar. As a result, more players are tempted to join the network and take advantage of the benefits that staking provides.
The approval of spot Bitcoin exchange-traded funds (ETFs) had a notable impact on Ethereum’s price action as well, although the implications are less direct. The fact that the U.S. Securities and Exchange Commission gave the green light for 11 spot Bitcoin ETFs was interpreted as a vote of confidence towards crypto which is going to bring more legitimacy to Bitcoin and digital assets at large and open up more opportunities for institutional investors. With Ethereum being the second largest crypto in the market, the altcoin emerges as a viable alternative to Bitcoin for investors seeking to diversify their portfolios with crypto assets.
Moreover, the launching of spot Bitcoin ETFs has given rise to speculations regarding the potential approval of spot ETH ETFs in the near future, thus thrusting Ethereum into the spotlight and paving the path for a bullish trajectory.
Insights from on-chain data
By all accounts, Ethereum has a lot going for it at the moment. However, no analysis would be complete without a look at Ethereum’s fundamentals. Unfortunately, things seem less auspicious when looking at on-chain data.
There hasn’t been much progress in terms of transaction volume on the Ethereum network and on-chain activity has also been rather sluggish lately. If we were to judge by these two key metrics, Ethereum’s chances of continuing its rally and taking the price appreciation further are relatively slim.
At the same time, daily open interest for Ether futures in derivative markets has experienced s considerable increase, showing there’s a growing interest in the asset from risk-oriented traders. All in all, on-chain data paints a grey picture at the moment, without any clear indications of an upcoming bull run.
From a technical perspective, there are two potential scenarios that Ethereum could experience in the short run. The upward trend supported by buyers could help Ethereum climb toward a new resistance level, most likely around the $3,500 mark. On the other hand, if Ethereum fails to consolidate and falls below the 20-day Exponential Moving Average (EMA), this could have a negative impact on its price performance and potentially keep the asset in a narrow price range for the foreseeable future.
Stepping into the future
Ethereum’s surge to $3K has been nothing short of spectacular and many hope that this is just the beginning of a new era of price increase for the altcoin. There’s no denying that the Ethereum network has multiple factors in its favor, including market sentiment, promising upgrades, the prospect of spot ETH ETFs, and growing investor confidence. However, one should not overlook the market’s inherent volatility and unpredictability. With a variety of factors influencing market dynamics, there’s no telling which way the balance is going to tilt, so caution and research should be a priority for all investors.
