Ether’s price experienced a surge of 10% in the first nine days of February, surpassing $2,450 for the first time in three weeks. This increase was in line with the overall positive momentum of the cryptocurrency market and heavily influenced by macroeconomic factors.
Despite the reasons behind Ether’s rally, investors are becoming more optimistic as deposits on the Ethereum network continue to rise. However, the question remains whether this momentum is enough to sustain a rise above $2,800.
The weak economic data from China and the concerning trends in U.S. fiscal debt have created an opportunity for risk-on assets. In an interview, United States Federal Reserve Chair Jerome Powell emphasized the need for a more sustainable public debt path. Projections indicate a potential increase in U.S. debt service costs, prompting a decrease in the Fed’s policy interest rate.
Chinese manufacturing activity contraction and measures introduced by the Chinese central bank to support the real estate development market have added to the concerns of traditional finance investors. As a result, some fixed-income positions were sold, causing the two-year U.S. Treasury yield to reach its highest level in two months. However, the record high reached by the S&P 500 index indicates that investors are not overly worried about an economic crisis, at least in the short term.
Despite the challenges faced by cryptocurrencies as the stock market continues to attract most of the investment flow, this situation also opens the door for alternative investments. Some stocks, such as chipmaker Nvidia and e-commerce giant Amazon, are trading at significantly higher earnings multiples compared to the S&P 500 average. This creates an ideal scenario for scarce alternative assets like Ether.
To determine whether Ether’s price gains in February are supported by sustainable demand for ETH, it is important to monitor the on-chain activity of the Ethereum network. The network’s smart contract deposits, measured by the total value locked (TVL), reached an 11-month high, with a 19% increase from the previous month. However, most of this surge occurred on the EigenLayer liquid staking solution.
Other notable mentions include the liquid staking applications Mantle LSP and Ether.fi, as well as the yield farming service Pendle. The Ethereum network has also maintained its position as the leader in fees, which serves as an indicator of effective demand. Ethereum’s fees over 24 hours are significantly higher than those of Tron and BNB Chain.
In addition to Ethereum’s existing use cases, there is optimism among Ether investors regarding a potential new nonfungible token format called ERC-404. This format would allow fractionalized capabilities within the current ERC-721 standard, potentially enhancing sector activity and stimulating further demand for ETH. The eagerly awaited Dencun network upgrade, scheduled for March 13, is also expected to bring benefits such as reduced transaction costs.
Considering the interest from fixed-income investors seeking alternatives to stocks and the continuous growth and development of the Ethereum network, Ether investors are not concerned about the recent price gains or the resistance at $2,650. The price action appears to be stronger compared to Ether’s previous test of this level on Jan. 11.
It is important to note that this article does not provide investment advice or recommendations. Readers should conduct their own research and analysis before making any investment decisions.