Ethereum consolidates as on-chain metrics highlight growing propositions

While Bitcoin managed to reach a new all-time high last week, Ether’s price has remained within a short distance of its high around $2,000 set in February. As Ether’s price consolidates higher, fundamentals for the underlying Ethereum blockchain continue to strengthen. 

Ethereum price looks fundamentally strong

Using blockchain data, it appears that investors have been eager to acquire Ether around the $1,800 mark. IntoTheBlock’s In/Out of the Money Around Price (IOMAP) groups clusters of addresses based on their buying price and classifies them as in the money or out of the money, borrowing from options terminology.  

Through the IOMAP, it is evident that a sizable amount of Ether (14.26 million) had been previously bought by 1.09 million addresses within $1,772 to $1,826 per Ether. This price range is expected to act as strong support given the high amount of buying activity.  

As of March 18, 2021, using IntoTheBlock’s ETH financial indicators.

On the other hand, relatively few addresses have previously bought Ethereum between $1,800 and $2,000. The biggest cluster of addresses would be the one around $1,900, where 91k addresses had acquired 435k ETH. This price range is expected to create some resistance prior to new all-time highs being tested. 

Zooming out from Ether’s day-to-day price action, key metrics highlight the remarkable growth taking place in the Ethereum blockchain. Ethereum’s fees — which account for the total dollar value spent to use the Ethereum blockchain — is at record levels, projecting over $8 billion in annualized fees. 

As of March 18, 2021, using IntoTheBlock’s ETH network insights.

In comparison, Bitcoin’s annualized fees are currently around $2.3 billion. This contrast highlights Ethereum’s growing utility and the reason why it is often referred to as digital oil. 

Although Ethereum generates significantly more fees than Bitcoin, it is still a fraction of its market cap. Most will argue that this is because of Bitcoin being the first cryptocurrency and its acceptance as a store of value, partly due to institutional adoption. 

While Ethereum certainly is behind on this aspect, on-chain data supports that a growing number of people are looking into the second largest cryptocurrency as a store of value. One metric that reflects this is the number of investors that have been holding Ether for over one year, classified as hodlers by IntoTheBlock.  

As of March 18, 2021, using IntoTheBlock’s ETH ownership metrics.

Long-term investing is essential for an asset to retain its value. In Ether’s case, we see that this number has been increasing consistently, having even grown through March of 2020 despite dropping 50% in price. This feeds its potential to become a store of value asset with long-term players holding regardless of its volatility. 

With a myriad of applications from DeFi to NFTs being built on Ethereum, it also makes sense for users to hold exposure to Ether to benefit from the growth of its ecosystem. This is especially true considering the upcoming implementation of EIP 1559, where a percentage of the fees in Ether spent using these applications is burnt, potentially reducing its supply. 

While there is still significant speculation, Ethereum has matured as a technology, as shown by fees users are willing to pay for its block space. In addition, Ether’s growing long-term investors and EIP 1559 are likely to propel its potential as a store of value. Ultimately, these factors point to a bullish outlook on Ethereum despite recently lagging Bitcoin price.