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Ether Could Hit $3,000 as Soaring Network Activity Turns Token Deflationary
The Ethereum blockchain settled $250 billion of transactions last week, the highest since mid-March, underpinning ether's bullish outlook.
Updated Nov 7, 2023, 5:27 p.m. Published Nov 7, 2023, 5:27 p.m.
Ether [ETH] broke out from its downtrend and could head towards $3,000 as the recent altcoin frenzy revitalized network activity, Markus Thielen, research head of Matrixport, noted in a report this week.
"Revenues for the Ethereum ecosystem are bottoming out from depressed levels; this could signal a tradeable bottom for ETH," said Thielen.
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Ethereum's weekly revenue – which is the income from the network's transaction fees, also known as gas – recently rose above $30 million for two consecutive weeks, up from a yearly low of $12 million hit in early October, Token Terminal data shows.
"A tactical bullish trade could have merit for as long as weekly Ethereum fees stay above $30 million," Thielen added, setting a $3,000 price target based on technical chart patterns.
The bullish outlook marks a pivot from Thielen's bearish views on ETH in September, where he cited deteriorating network revenues and user activity. Indeed, ether early in October declined to a 7-month low, while its relative valuation against bitcoin [BTC] tumbled to a 15-month low.
Alongside a major rally for bitcoin and the rest of the crypto market since, ETH has bounced roughly 20%, recently changing hands at $1,870.
Ether turns deflationary
Capital rotation from bitcoin to altcoins helped spur user activity on Ethereum, which is the foundation of many decentralized finance (DeFi) protocols and decentralized exchanges (DEXs), IntoTheBlock pointed out.
The network settled $250 billion of asset transfers last week, the most in value since the mid-March regional banking crisis and up from $105 billion in late August, per IntoTheBlock data.
As a result of soaring activity on Ethereum, blockchain data shows that more ETH was burned than added to its supply over the past week, turning the token deflationary after two months of being inflationary.
The rising on-chain activity signals that fundamentals of the crypto market are improving, according to Lucas Outumuro, research head at IntoTheBlock.
"Improving on-chain activity and growing spot-driven inflows point to strong demand driving crypto's rally," Outumuro said.
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