The cryptocurrency markets continue to experience volatility, with altcoins showing significant rallies as we approach the final week of the year. Investors have high expectations for the coming year, particularly for Ethereum (ETH), which has not seen the desired price increase in 2023. The question arises: why could ETH’s price potentially surpass $2,500 in the near future?
Recently, Ethereum tested the $2,120 support level and has rebounded to $2,318. Analysts suggest three main reasons why ETH could exceed the $2,500 threshold. Firstly, the volume of Decentralized Applications (DApps) and protocol fees on the Ethereum network are crucial. These applications, such as DeFi and NFT platforms, drive network revenue and profitability. Increased interest in these applications translates to higher network income.
For Ethereum, network revenue is particularly significant as a portion of transaction fees are burned, meaning more transactions lead to a reduction in supply. DApp volumes on Ethereum have recently reached $27.8 billion, marking a 14.2% increase from the previous week, with notable growth in Uniswap and Balancer volumes.
The second reason for potential growth is the anticipated approval of spot Bitcoin ETFs, which will likely shift focus to similar applications for Ethereum by major asset managers like Fidelity and BlackRock. Ethereum’s potential for growth and profitability, along with staking income, could drive significant demand for a spot ETH ETF. Issuers required to hold an equivalent amount of ETH in reserve for the ETF could contribute to a scarcity in supply, further driving up the price.
Lastly, derivative market data is a key indicator of price direction. The Ether futures premium, which measures the difference between two-month contracts and the spot price, has reached its highest level in a year. This indicates that institutional and accredited investors maintain a bullish outlook for the medium term. The current 13.5% annual premium on Ether futures contracts is also promising for the $2,500 price target.
With these factors in mind, Ethereum’s price could potentially break through the $2,500 barrier, especially after January 10, when the market may respond to these expectations. The combination of DApp growth, potential ETF approvals, and bullish derivative data paints a hopeful picture for Ethereum’s price in the near term.