As the second-largest blockchain network, Ethereum has garnered massive attention from investors and traders since its inception. ETH is trying hard to escape the previous year's bearish sentiment and began 2023 with an impressive rally throughout January.
Price forecasts predict that the crypto is set for bright days ahead this year. Let’s see why the ETH price is on an uptrend lately, making the crypto a good buy now.
Is ETH Price On An Uptrend Lately?
ETH had an uptick in its network activities recently, followed by a price rally, hitting a year-to-date high of $1,855 on March 23. Ethereum’s DeFi ecosystem received more daily fees, growing 9% in 24 hours on March 23 with its price growth. With the increase in Ether fees, its tokenomics have become deflationary, with revenue increasing by 10% in 24 hours.
Ethereum network fees and revenue. Source: TokenTerminal
Although the Ethereum network is showing positive momentum, there are still uncertainties looming around the token. Regulators are trying to take swift action against the crypto sector, and debates on whether Ether is a security token under the Howey test continue to take place. Some investors even believe that the upcoming Shanghai update would unlock staked Ether and potentially increase selling pressure.
Therefore, ETH is surrounded by both negative and positive social sentiments, leaving investors in utter confusion. However, price predictions say that post-merge Ether would enjoy a short-term price rally, and here are three reasons why the crypto is on an uptrend lately.
The Increase In The Deflationary Nature Of Ether
ETH had a recent spike in its price on March 23, and one of the main catalysts for this was the burning of 1,755 Ether over the past 7 days. One of the many benefits of Ethereum’s transition to a Proof-of-Stake mechanism is its move towards a deflationary nature. Ether even peaked at an all-time token emission low of -0.1%, yearly.
Ethereum post-merge supply. Source: ultra sound money
Since the London upgrade which was completed on August 6, 2021, 1% of Ether’s total supply has been burned, and this correlates to over 1,853 Ether burnt in 595 days.
Ethereum post-burn supply. Source: ultra sound money
Increase In Gas Costs Due To Arbitrum’s ARB Airdrop
Arbitrum, the Ethereum layer-2 scaling system that provides faster and cheaper transactions, has picked up the pace recently, showing increased activity on the network. One reason for this sudden increase is the planned airdrop of its native token ARB in the past week. The number of daily transactions on the layer-2 network successfully breached the previous peak of 1,103,398, setting a new record high of 1,312,052.
Arbitrum airdrop. Source: Nansen
Following the airdrop, ETH jumped over 6% in a few hours. The key reason for the spike in ETH price was Arbitrum’s relationship with Ethereum and its ability to conduct cost-effective transactions on the blockchain in a more timely manner. Also, fees for claiming the ARB airdrop on the Arbitrum network were paid using ETH. There has been a significant increase in Ethereum gas costs as users strived for speed by paying higher gas fees once they were able to claim the airdrop.
Ether fees. Source: ultra sound money
Arbitrum's addition of exorbitant transaction fees is not the only factor that has contributed to the phenomenon of one-day burns. The transfers of Ether to Arbitrum and the use of Uniswap's universal router have also played a pivotal role in this regard.
Ether burn leaderboard. Source: ultra sound money
The Scheduled Shanghai Hardfork
Another reason the ETH price is on an uptrend is the positive sentiments surrounding the long-awaited Shanghai mainnet upgrade. Although it was initially slated to launch on March 14, developers on March 2 announced the unexpected delay in the hard fork until April.
Data shows that the phased withdrawal of staked Ether on the Beacon Chain would not create massive selling pressure any time soon. However, ETH would remain volatile ahead of the upgrade.
Experts like Ether price analysis Max Kalmykov, the CEO of trading automation platform Bitsgap, has also foreseen the upcoming volatility but believes in its bull run when he said, “The forthcoming Shanghai upgrade could potentially result in significant fluctuations in the market; however, Ether's recent breach of the $1,400 resistance level suggests that its value might continue to climb."
However, the Shanghai upgrade would introduce crucial elemental changes and updates to the blockchain’s EVM functionalities. Another biggest factor the upgrade would bring is a reduction in gas fees for layer-2 solutions running on top of Ethereum. Thai would mark another monumental development for the Ethereum blockchain post-merge, pushing the price to new all-time highs.
Is ETH A Buy Now?
Ethereum, often touted as the "silver" of the crypto sphere, is a market leader within the blockchain space. There has been an increase in the number of Whale accumulations on Ethereum lately, which has also significantly contributed to ETH’s price rise.
However, several macro factors like inflation-induced interest rate hikes and U.S industry crackdowns would continue to haunt ETH price rise, implying that there’s only a short-term growth potential for the crypto in the coming months.
But on a bullish note, positive regulatory clarity and an easing of interest rate hikes could send ETH prices to new highs in 2023.
ETH price is certainly on an uptrend, posing a good buy now for long-term investors. However, Ethereum has proven to be an extremely volatile investment over the years, and sudden price fluctuations are bound to happen. But, the crypto has several updates and developments in the pipeline, backing its bullish outlook in 2023 and beyond.