Why Ethereum Is A Good Buy Right Now: Supply Squeeze, DeFi Boom, and More!

Ether might be trailing behind Bitcoin this year, but Coinbase analysts believe the cryptocurrency has strong long-term potential and could surprise investors with a significant rise. In a research report released on Wednesday, Coinbase highlighted ETH’s resilience and growth potential in the fast-changing digital asset market.

Ether’s Performance This Year

Ether, the second-largest cryptocurrency by market capitalization, has increased by 29% this year. While this is a solid gain, it falls short of Bitcoin’s impressive 50% surge. The broader crypto market has seen a 28% rise, indicating that while ETH is in line with the overall trend, it hasn’t outperformed the market.

Key Drivers of Ethereum’s Growth

Reduced Liquid Supply

Coinbase analyst David Han suggests that,

“Ether may have the potential to surprise to the upside in the coming months,”

He points out the absence of significant supply-side pressures such as token unlocks or miner sell-offs. One important factor is the reduced liquid supply of ETH due to staking and the expansion of layer 2 solutions.

Staking and L2 Expansion

The report emphasizes several factors that could drive Ethereum’s value higher. Firstly, both staking and the expansion of layer 2 solutions have significantly reduced liquid ETH supply. 

“Staking and layer 2 growth have proven to be meaningful and growing sinks of ETH liquidity,”

Secondly, Ethereum’s position as the cornerstone of the DeFi ecosystem remains secure due to the widespread adoption of the Ethereum Virtual Machine (EVM) and innovations in layer 2 solutions. 

DeFi Dominance

Ethereum’s key role in the decentralized finance (DeFi) ecosystem is another strong factor. The widespread use of the Ethereum Virtual Machine (EVM) and new developments in layer 2 solutions ensure Ethereum’s continued importance.

The EVM allows for the creation and execution of smart contracts, which are essential for DeFi applications, providing a strong foundation for Ethereum’s value.

“We think the market may be underestimating the timing and odds of a potential approval,”

Bullish Technical Patterns

Technical analysts have identified several positive patterns that support a good outlook for Ethereum. A completed Bullish Cypher pattern and a bounce off the key 38.2% Fibonacci retracement support level around $2800 are promising signs. Historically, this level often leads to price rallies during bull markets.

Understanding the Market Sentiment

Ethereum’s previous spike above $4000 is seen as a major turning point, suggesting the start of a new long-term uptrend. Analysts like Titan of Crypto and JACKIS highlight these technical indicators as signs of an upcoming breakout.

Prominent cryptocurrency analysts are also optimistic about Ethereum. CryptoYoddha predicts that Ethereum could surge past $10,000 by the end of 2024, citing strong on-chain supply dynamics and solid DeFi fundamentals. Michaël van de Poppe expects significantly higher prices in the coming weeks, noting that ETH seems to be in the final stage of its correction.

Are you bullish or bearish on Ethereum’s long-term prospects?

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