Since March last year, ETH prices have been in a sluggish state. The following are six key factors that require XEM for the short, medium, and long term ETH prices in the last quarter of 2023
Since March last year, ETH prices have been in a sluggish state. The following are six key factors that require XEM for the short, medium, and long term ETH prices in the last quarter of 2023.
Low costs will promote inflation (price increases and decreases)
Thanks to upgrades (TheMerge, Shanghai...) and Layer2 solutions, the Ethereum chain has achieved many achievements, such as faster transaction processing speed and cheaper fees.
However, low gas fees are a sharp knife. Because low gas fees can attract many users and developers to Ethereum. However, due to the destruction of fewer tokens than the newly issued tokens by the pledgor, ETH inflation may rise.
In the past 30 days, ETH supply has surged by 36463 ETH. Therefore, inflationary inflation is not conducive to the price of ETH and is far from the initial downward effect of the merger.
Ethereum supply over the past 30 days.
Ethereum's surge in new supply in just one month has sparked inflation concerns
ETH prices are bullish on 1-year and 5-year charts (up trend)
The project team and its supporters assert that Ethereum exists to become the world's leading decentralized computer. The Merge upgrade is an important stepping stone for improving the throughput capacity of the blockchain.
In today's Ethereum, for example, there were not enough pipelines to transport all the oil before, but now there is less oil in one pipeline. Not only that, but when the time comes, the network will also achieve greater growth.
Meanwhile, on the one-year chart, ETH prices fell to a 7-month low. It is uncertain when it will bottom out, but prices are close to the historical peak valley average.
From the five-year chart, ETH prices are even lower, down 76% from the historical high of $4600 in November 2021. However, according to Santiment's data, the number of ETHs on the exchange is still at its lowest level since 2018.
This is an upward trend signal for ETH, as such measures "reduce selling pressure and demonstrate long-term investor confidence". Therefore, holder is clearly very confident in the long-term macro theoretical value of Ethereum.
The demand for ETH pledge has decreased since June (decreasing)
According to the validator queue data of Beacon Chain Ethereum ExExplorer, in June, 96600 people queued up to use ETH as the validator node to obtain blockchain rewards. However, by October, this number had dropped to 16 (recorded on October 17th).
The average waiting time for mortgage ETH has decreased from 45 days to 1 hour and 50 minutes. This does not necessarily bode ill for prices. One of the reasons for the decrease in collateral demand is the availability of more liquid collateral options such as Lido.
However, Lido and other liquidity pledge services bring additional risks to Ethereum.
Earlier this month, due to a technical error, 20 Lido validators were suddenly kicked out of the network, resulting in Lido losing $30000 in ETH to extract the ETH he pledged.
In addition, pledge services have also received attention from the US Securities and Exchange Commission (SEC). Therefore, the pledge prospects of Ethereum are currently tending to decline.
ETH Price and Institutional Demand (Rising Market)
However, Ethereum's pledge demand may not always remain low, as institutional investors are increasingly interested in on chain BTC and Bitcoin ETF spot and ETH pledges.
Tradfi institutional investors like ETH because it is more energy-efficient and environmentally friendly than Bitcoin. This is very beneficial for Ethereum as Wall Street is taking significant measures in the cryptocurrency sector:
Earlier this year, Larry Fink, the legendary CEO of BlackRock, shocked the world by announcing his unexpected support for cryptocurrencies. He stated that he has high expectations compared to Bitcoin and cryptocurrencies, as they will "surpass" traditional currencies including the US dollar due to Wall Street's acceptance.
One of the Tradfi organizations, Standard Chartered Bank in the UK, is very optimistic about these prospects, predicting an upward trend of $8000 for ETH.
Regulatory Threats (Declining)
Although institutional investors are interested in ETH pledge, it will still take some time for traditional financial institutions and hedge funds to join the competition.
One of the main reasons is that the US Securities and Exchange Commission is too hands-on, leading to regulatory ambiguity, and some US policymakers need time to understand and enact blockchain policies.
At the same time, traditional institutional investors do not want to take any significant measures without certainty. Because they don't want to jeopardize their relationship with the SEC.
ETH Price Supply and Demand Economics (Rising Market)
Like its cousin Bitcoin, ETH and other major cryptocurrencies have an incredible record of high investment returns based on monetary policy and supply and demand over the years.
Although the Federal Reserve is committed to curbing inflation, it cannot avoid expanding monetary policy to prevent economic stagnation.
The Federal Reserve seems to be preparing to suspend interest rate hikes or adopt a more dovish system in 2024. This always drives the macro rise of Bitcoin and ETH.
In addition, the upcoming Bitcoin halving cycle will occur in April 2024. In each cycle so far, halving has been the main factor driving the upward trend of Bitcoin and ETH, as profits flood into other parts of the ecosystem in search of more investment returns, and competing currencies chase BTC.
In addition, in the current discussion of supply and demand economics supporting ETH prices, it is worth mentioning again that the number of ETHs on the exchange has reached its lowest level in five years.
As of the writing of this article, ETH's trading volume is approximately $1588, with a market value of $190 billion.
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