The Long and Short of the Ethereum Growth Story

In this article, we will be looking at what’s in store for Ethereum in the short term and long term from multiple perspectives.

15:06 04 February 2022

Bitcoin is still the indisputable leader of the crypto pack. To displace the crypto heavyweight of its throne and take the top spot is a tall ask but a few altcoins like Ethereum and Solana are already nipping on its heels.

 

Ethereum, in particular, has clearly emerged from Bitcoin's shadow. It won’t be an overstatement to say that Ethereum is a real chance to give Bitcoin a run for its money now that ETH has consistently generated higher returns than BTC for over 5 years since 2016.

 

One area where Ethereum is miles ahead of its bigger cousin is the way in which its blockchain-based network is used as a smart utility. Developers are able to utilize smart contracts and create useful tools, apps, and Non-Fungible Tokens aka NFTs, which, in particular, have now turned into a fad. Experts are hoping there’ll be an explosion of NFT in gaming, entertainment, art, and music. Developers focusing on other non-NFT projects have also come out with several useful apps and tools that have pushed the boundary of a fledgling field like decentralized finance, too. The demand for these tools and apps is off the charts now, and more likely to continue to soar up as more people start appreciating the real value these smart applications and projects bring to the table.

 

The Short: Signs of Recovery from Flash Crash Not Ruled Out, from the Price Perspective

The Ethereum growth story taking off is an encouraging sign for Ethereum investors going forward. But the recent crypto rout has kind of crashed the party, so to speak. Ethereum made a record high in November but fell sharply following the footsteps of Bitcoin. Sellers pushed the price down to the $2300 level before buyers stepped in and forced them to wind up their short positions. But Ethereum had lost over 50% of its value by then. Much to the relief of Ethereum enthusiasts, a minor rally happened allowing ETH to run to safety but we’re not out of troubled waters just yet.

 

As of writing, Ethereum is changing hands for $2850. People with bullish bias have little reasons to be happy though, as the upside looks capped: there are multiple resistances for Ethereum to negotiate on its way up and any movement into the resistance zone could trigger a violent reaction sending the price crashing. And, the price may go back to test the key $2300 support level again, and, if it gives way, the downward momentum might continue taking the price to $1730 or even lower.

 

Will it pump and go skyrocketing to test the levels it fell from? Or will market participants keep selling it through its key support level, setting off another crypto correction? All we can say for now is that the market is not out of jail yet and kind of stuck in a range bound movement trying to stay afloat. There is no clear sign of a trend establishing at the moment.

 

Let’s turn our attention to what the on-chain indicators and the market fundamentals are pointing at.

 

The Long: On-Chain Indicators Reaffirm Bullish Bias over the Long Term

Glassnode, the data analytics provider tracking on-chain activity, has come up with a report recently which might lift up the mood of investors in what has been a largely dispirited market.

 

First up, on-chain metric ETH Number of Exchange Deposits tumbled to a new low earlier last month, which is a sign of the bearishness evaporating from the market. Put simply, the higher the transactions sent out to trading platforms the more the bearish bias. In the same manner, the low number of transactions sent out to trading platforms shows that the tendency of the market is to hold their assets.

 

The market sentiment is still not positive, and another explosive bull rally looks a remote possibility at least for the short term. The retail participation is not quite there but Ethereum whales are bustling with activity. They don't see any reason not to take part in this dull market and have been very busy picking up all the ETH dumped on the market during this downtrend, as the on-chain Glassnode metric shows. Addresses holding over 10000 ETH on their balances have been active lately buying the dip, scooping up approximately $500 million worth of ETH in the wake of the flash crypto crash. And that has injected a dose of optimism in the minds of retail traders and investors who're still a bit circumspect about purchasing ETH. Want to be a successful Ethereum trader? Check out ethereum code to figure out how their cutting-edge trading application is helping Ethereum traders find their edge and execute a string of winning trades even in this ranging market.

 

Furthermore, another key Glassnode metric, the ETH Number of Addresses Sending to Exchanges has gone down considerably in the last 30 days. Put that in the context of another key on-chain metric the Ethereum: Balance on Exchanges- All Exchanges, which in itself is on a bit of downtrend for a while now, the message is clear: ETH investors are playing the long term game and in no mood to liquidate their holdings.

 

The Long: Ethereum Setting itself up for Success Amid Threat of Fresh Competition, from a Market Fundamental Perspective

Smart contracts are going to continue to be a game-changer for Ethereum. For the uninitiated, a smart contract is a special program that's similar to an Ethereum account, but no user has control over it; and it's meant to be deployed to the blockchain and run as programmed. They've opened up a world of new possibilities for creators to create and sell their digital assets known as NFTs, which have received an overwhelming response since the first expensive one sold for a whopping $69 million in an one-of-its-kind auction at Christie’s just 11 months ago. But the market for NFT has grown immensely and now stands at $41 billion, with Ethereum accounting for almost 90% of it.

 

The roaring success and popularity of NFTs has resulted in an explosion of traffic, driving down the transaction speed significantly while pushing up the costs several times higher.

 

This problem of scale is proving to be a tough challenge for the Ethereum team to overcome. The Ethereum team is trying to tackle the capacity problem and looking to crack the code thru multiple ways: develop new upgrades to its infrastructure, rolling out add-on projects that sit on top of the existing blockchain etc. While it’s at it, more new competitors like Solana, Cardano are looking to enter the scene and take away a good chunk of users from Ethereum into their respective blockchains, which also have native cryptocurrencies. Now that's a serious threat.

 

As the Ethereum team prepares itself to grapple with all these issues, experts are still positive though. They tie their optimism to just two things that the second best of the crypto pack has going for it: a very loyal community and the tech smarts to be able to drive innovation continuously. And they are convinced Ethereum’s next push to challenge Bitcoin for the top spot will ride on these two things.

 

The Ethereum growth story is very much on and has come through the crash unscathed, as suggested by several on-chain indicators and the fundamental signals emerging from the market.

 

Here’s the long and short of it. Ethereum is here to stay and currently gearing up to make bigger waves in the crypto waters. It won’t be long before it becomes a force to be reckoned with in the crypto community.