At the beginning of 2021, Ethereum's growth exceeded that of Bitcoin. Will it continue to rise in the future?

Ethereum, the second-largest cryptocurrency by market value, has surged since the beginning of the new year. It has outperformed Bitcoin by about 81% since January 1. Last Sunday, the price of Ethereum soared to $1,454.32, setting another all-time high. Despite a temporary pullback, it is still one of the strongest performing assets among the top ten assets.

Ethereum Price Analysis

Ethereum has climbed above the $1,300 overhead resistance and the bulls are attempting to resume the uptrend. The upsloping moving averages and the RSI above 61 suggest that the bulls are in control.

ETH/USDT daily chart

If the price turns down from the overhead resistance, the pair can drop to the 20-day EMA ($1,166). A rebound from this support will increase the possibility of resuming the uptrend.

However, if the next decline breaks below the uptrend line, it will indicate a possible change in trend. The next support on the downside is the 50-day SMA ($882).

ETH/USDT chart

The bears are currently attempting to hold the overhead resistance at $1,350. If the price turns down from the current levels, it is likely to find support at the moving averages. A rebound off this level will indicate that the bulls are buying on every minor dip, which will strengthen the possibility of a breakout above $1,350.

Contrary to this assumption, if the bears sink the price below the moving averages, the pair could drop to the uptrend line. A break below this support will signal a change in sentiment and could result in a deeper correction.

Ethereum's growth surpasses Bitcoin

Bitcoin is up more than 15% so far in 2021, but Ethereum has performed much better, gaining more than 70% in the same period.

The growth of DeFi tokens has been driven by the DeFi market’s rapidly growing total value locked (TVL), which is the most popular metric for tracking DeFi and its corresponding growth.

According to OKLink data, the total locked value (TVL) of Ethereum DeFi protocols has exceeded $36 billion, indicating that there is a huge demand. This is crucial to Ethereum's momentum as more and more applications and tokens rely on its network.

In August 2020, Arcax and Algorand announced plans to develop tools for the introduction of DeFi among institutions. In the fall of 2020, xSigma, a subsidiary of ZK International, which is traded on the Nasdaq, worked on the development of DeFi services and prepared to launch a decentralized exchange for trading stablecoins.

Other first-layer blockchain protocols are also growing and expected to compete with Ethereum, such as Polkadot and Cosmos. However, in the foreseeable future, Ethereum's network effect and the combined value of DeFi protocols on Ethereum make Ethereum's dominance in the DeFi field unlikely to be challenged in the short term.

The Ethereum community is bullish

Since Ethereum broke its record price set in January 2018, the sentiment surrounding the Ethereum community has become extremely positive.

Anthony Sassano, a long-time Ethereum investor and head of marketing at Set Protocol, said the rally represents the foundational work done by developers in the Ethereum ecosystem over the past three years.

New momentum due to increased demand for decentralized finance has allowed Ethereum to outperform Bitcoin in the recent bull cycle. Sassano said:

“Many dedicated Ethereum community members have spent 3 years building the Ethereum ecosystem during the bear market. Now, their efforts are rewarded.”

On-chain data also shows an upward trend, while there are many other indicators that suggest that the ETH price rally may have just begun.

Ethereum price trend over the week

Ethereum transaction volume growth

In 2020, the value of transactions recorded on the Ethereum blockchain exceeded $1 trillion. These figures exceed the transaction volume of payment giants such as PayPal, which has more than 350 million users and generally does not exceed $200 billion in transactions per quarter on average.

Each transaction generates a network fee paid in ETH. And since the network’s growth rate remains high, we can confidently expect Ethereum’s “bullish” trend to continue.

Interest in cryptocurrencies is growing, as is the number of active wallets, the number of transactions on the network, and the average transaction size.

According to on-chain data from blockchain analytics firm Glassnode, the number of whale addresses (those with at least 10,000 ETH) jumped to 1,103 last Saturday, a 13-month high. There have been 35 new additions this month alone, and 75 since mid-November. The increasing accumulation of funds by investors could drive Ethereum prices further up.

Number of addresses with more than 10,000 ETH

On Jan. 19, Spencer Noon of cryptocurrency venture capital fund Variant noted that over the past eight months, more than 1 million unique addresses have interacted with DeFi.

Noon added that monthly DEX trading volumes are currently at an all-time high of over $30 billion, while over $20 billion has been deposited in DeFi lending protocols.

In addition to DeFi, Noon also emphasized that Ethereum is the largest blockchain network in terms of daily fees - more than 50% higher than Bitcoin; the number of daily active Ethereum addresses has doubled to 550,000 in the past 12 months, setting a historical high; nearly $20 billion worth of stablecoins have been minted on Ethereum in the past year.

Despite Ethereum’s surging fundamentals, Noon noted that the number of ETH transactions worth more than $100,000 is seven times less than the January 2018 high, suggesting that “institutions are still not in the game.”

Ethereum daily transaction volume

In 2021, Ethereum achieved a "good start", so what factors will drive its price further up in the future?

Ethereum Futures Coming Soon

The Chicago Mercantile Exchange (CME), the world's largest derivatives platform, publicly announced on December 16 that it plans to launch Ethereum futures by February 8.

The arrival of Ethereum futures will ultimately bring more maturity to the crypto market, with greater liquidity despite the lack of physical delivery. This is beneficial because it will give institutional investors the opportunity to hedge their spot positions, thereby reducing overall risk and making Ethereum a more attractive investment.

Ethereum 2.0 Phase 1 is expected to be launched this year

Ethereum is transitioning from a proof-of-work blockchain to a blockchain that runs using a proof-of-stake consensus mechanism, with the goal of becoming a faster, more efficient, and more scalable platform. The Ethereum 2.0 upgrade is divided into four different phases: Phase 0, Phase 1, Phase 1.5, and Phase 2. Each phase lays the technical foundation for the next phase until the final phase is completed.

Phase 0 went live on December 1, 2020, and implemented the Beacon Chain (a new blockchain layer that will coordinate activity between the individual Ethereum shard chains).

Phase 1 is the next stage in Ethereum development and will see the launch of 64 shard chains. All transaction activity across the network will eventually be distributed and processed between these separate blockchains. The advantage of this new system is that transactions will not require the entire network to verify, but only one shard chain. This will significantly reduce the time it takes to confirm transactions, and the entire network will be able to handle a larger volume of transactions without suffering from the current network congestion.

While there is no exact date for the launch of the first phase, it is expected to be launched this year.

in conclusion

Ethereum had a good start in 2021, with a higher growth rate than Bitcoin. While Bitcoin was consolidating with low volatility, Ethereum did not "slump" but achieved a "reversal" with a significant increase in trading volume. Let's wait and see how its trend will develop in the future!

Image credits: Tradingview, Pixabay, Glassnode, Etherscan,io

Author: Amy Liu

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