In a recent Q2 2023 Signals Report, Fidelity Digital Assets presented a highly optimistic forecast for Ethereum (ETH) in the forthcoming year and beyond. Ethereum’s impressive performance year-to-date, registering a 60% gain, bolsters this rosy outlook. However, the investment firm’s short-term bullish stance does not necessarily predict a sustained upward trend for Ethereum.
Decoding the Reasons Behind The Fidelity Bullish Outlook
The bullish stance on Ethereum’s future hinges primarily on three factors:
- The network’s burn rate surpassing coin issuance
- New address momentum
- A surge in the number of network validators
Fidelity Digital Assets points out that the net supply of Ethereum has dropped by over 700,000 since the Merge in September 2022, indicating a significant decrease in net issuance.
The report also identifies an upward trend in the number of Ethereum addresses transacting for the first time, reflecting a healthy network uptake. This data, acquired from Glassnode, strengthens the bullish perspective on Ethereum by Fidelity.
Furthermore, the report underlines a 15% rise in active Ethereum validators in Q2 2023, fostering confidence in Ethereum’s growth and potential.
The Anticipated EIP-1153 and Its Implications
The anticipation surrounding EIP-1153, a proposal aimed at enhancing smart contract efficiency and reducing costs on the Ethereum network, is another significant bullish factor. This improvement can amplify the Ethereum Virtual Machine design, proving particularly beneficial for decentralized exchanges (DEXs).
In the bullish camp for Ethereum is the planned upgrade on Uniswap, the leading DEX. As per a presentation at the Ethereum Community Conference on July 17, the forthcoming Uniswap v4 is poised to offer users the ability to create an array of pools using programmable buttons (hooks), native ETH support, and a singleton contract for executing internal transactions before final balance settlement.
This announcement amplifies the chances of including EIP-1153 in the subsequent “Dencun” upgrade. If greenlit, this implementation could be pivotal for Ethereum to regain the market share lost due to high gas fees. The seven-day average transaction cost has remained above $4 since February, resulting in Ethereum’s total value locked dropping to its lowest level since April 2020 at 13.55 million ETH, according to data from DefiLlama.
Balancing the Scales: Short-Term Challenges
While the Fidelity report offers valid reasons for its bullish stance on Ethereum’s price performance over the next 12 months, there are short-term challenges to consider. High gas fees and the lack of interest from leverage buyers may increase the chances of Ethereum’s price dipping below the channel support.
The journey of Ethereum is one to watch closely. As we move into the future, the interplay of market dynamics, technical innovations, and investor sentiment will continue to shape the path of this promising cryptocurrency.
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