Ethereum has been trading at over $ 1,600 for more than two days, a move expected from altcoin after reaching its old ATH on the charts a week ago. Curiously, many technical analysts think Ethereum remains below its value even above $ 1,700.
In fact, in light of the hashrate and active addresses on the network, traders have been on the rise for ETH in the near term, especially as other on-chain metrics signal an upcoming rally. Now there are different ways to value Ethereum based on daily transaction fees collected on the network. Likewise, Grayscale’s recent report on the valuation of Ethereum concluded that Ether is the commodity that pays rapidly rising wages, adding that just as an increase in travel can increase demand for gasoline, higher wages also increase demand for Ether.
The increase in wages doesn’t really hurt its valuation. Instead, it drives demand and opens up the possibility of higher wages and value. While the increase can hurt traders’ portfolios, it has an overall positive effect in the long run as the valuation increases. According to the attached table, it is noteworthy that Ethereum’s daily transaction fees are approximately 5 times as of January 2021, compared to the highest fees in January 2018.
The game changer for Ethereum, one thing that could justify its acquisition cost of over $ 1,600, is that it emerged as an interest-bearing asset. The initial value is derived from the utility and supply-demand dynamics as it is driven by active supply, balance of change, and demand. The benefit can also be observed through the staking process, because when ETH 2.0 was launched, staking meant investors had confidence in Ethereum’s future prospects.
This contributed to an increase in distribution, an increase in market capitalization and a steadily declining active supply; all factors that act as a positive feedback loop. This cycle is expected to affect the positive sentiment in both the spot markets and the Futures markets and to increase the price steadily in the long term.
In addition, staking reduced supply in the market, which supported the scarcity narrative that led to Bitcoin’s rally. Bitcoin and Ethereum do not currently share a high correlation, but the narratives are similar and expected to yield similar results. As a result, if the allocation remains positive and the valuation narrative continues to play until 2021, buying over $ 1,600 may be the right strategy.