On-chain activity surges and institutional funds pour in! Ethereum is about to grow explosively and

summary： On-chain activity surges and institutional funds pour in! Ethereum is about to grow explos...

On-chain activity surges and institutional funds pour in! Ethereum is about to grow explosively and aims to break through "this price"!

With Ethereum's ongoing technical upgrades and the sustained growth in market demand, the price trend of Ether has once again become a focal point for global investors. Recently, data analytics firm CryptoQuant proposed a prediction that Ether could potentially break the $5,000 mark, citing multiple indicators supporting this outlook. From on-chain activity and the deflationary effect to institutional investment demand, confidence in Ether is gradually strengthening.

Supply and Demand Dynamics and Target Price Analysis

CryptoQuant experts highlight that Ether's current supply-demand dynamics are providing strong support for its price. Data shows that Ether's "Realized Price Bands" are a key indicator reflecting the historical average trading price of Ether. The upper limit of this indicator is currently around $5,200, consistent with the price range seen during the 2021 bull market peak. This suggests that as more buyers trade at prices above the current market rate, the potential for future upward price movement remains significant.

Market experts believe that if existing buying demand continues to grow, coupled with tightening supply conditions, Ether could challenge the $5,000 level or higher in the coming months. This prediction is not only based on technical analysis but also closely tied to the behavior patterns of market participants.

On-Chain Activity and Ecosystem Growth

Since early 2024, Ethereum's on-chain activity has significantly increased, reflecting the thriving development of its ecosystem. According to CryptoQuant data, daily transaction volume has grown from around 5 million transactions in 2023 to between 6.5 million and 7.5 million. This surge indicates that more individuals and businesses are engaging with the Ethereum network, highlighting the broad acceptance of the network's application layers.

Additionally, the use of smart contracts has seen substantial growth. Daily dApp calls have risen from 5 million last year to between 6 million and 7 million. These applications span decentralized finance (DeFi), gaming, NFTs, supply chain management, and more, attracting increased user participation.

As transaction activity increases, Ethereum's fee revenue also rises, with a portion of these fees burned, reducing Ether's supply. Since the implementation of the EIP-1559 proposal, this burning mechanism has played a significant role in influencing Ether's supply. Since September of this year, the amount of burned Ether has notably increased, creating a deflationary pressure that further supports Ether's price foundation.

Deflationary Effect and Price Impact

Ethereum’s deflationary mechanism, driven by EIP-1559, is one of the key forces impacting Ether’s price. By permanently removing a portion of transaction fees from the market, the proposal reduces the overall supply of Ether. Latest data shows that since early 2024, the burn rate has been steadily increasing. This mechanism not only has short-term effects but could contribute to long-term price support.

Moreover, as more dApps emerge and user adoption grows, total fee revenues are expected to continue rising. This means that future deflationary pressures are likely to become more pronounced, positively impacting Ether's value.

Institutional Investment Surge

Institutional investors have played a crucial role in driving Ether's price upward. Recently, the strong performance of Ether spot ETFs has garnered significant attention. Particularly in the U.S. market, major asset managers like BlackRock and Fidelity have seen massive inflows into their ETF products.

According to recent reports, these ETFs have witnessed over $10 billion in net inflows just this week. Since the beginning of the year, the total assets under Ether spot ETFs have reached $131.8 billion, accounting for 2.86% of Ether’s total market capitalization. Such substantial inflows reflect institutional investors' growing confidence in Ether's long-term value.

Beyond ETFs, family offices, hedge funds, and other institutional investors are increasingly allocating capital to Ether. This indicates that Ether’s status as a mainstream asset is becoming more established. Many analysts believe that as market infrastructure continues to improve, institutional involvement will remain strong, providing more stable support for Ether’s price.

External Factors Impacting Price

In addition to internal factors, macroeconomic conditions and policy developments also play a significant role in Ether's price movements. For example, changes in U.S. Federal Reserve monetary policy, global geopolitical risks, and cryptocurrency regulatory adjustments can all influence investor confidence and market liquidity.

Recently, as U.S. regulatory bodies have begun to clarify their stance on the cryptocurrency market, market sentiment has improved. Many participants believe that a clearer regulatory framework will attract more traditional funds into the crypto space, further driving upward pressure on Ether prices.

On the other hand, geopolitical events and fluctuations in the U.S. dollar index could also impact Ether’s price trends. As a global asset, Ether’s demand tends to respond to risk-averse sentiments. Therefore, investors need to closely monitor changes in the macro environment.

Future Outlook

Overall, Ether's price dynamics are supported by multiple factors, including on-chain activity, deflationary pressures, institutional investment demand, and macroeconomic support. As Ethereum’s technology continues to evolve and its ecosystem expands, its value proposition becomes increasingly prominent, attracting more capital and users.