Several well-known analysts said that although Ethereum (ETH) has grown by nearly 65% in 2021, it is on the cusp of a bull market. Ethereum has seen explosive growth in decentralized finance and other areas, leading to a surge in user activity on the blockchain.
Ethereum's performance in 2021, source: Digital Assets Data
Raoul Pal, CEO of Real Vision Group, accurately pointed out the technical structure of ETH price. He emphasized that the structure is surprisingly similar to Bitcoin (BTC) in 2016, which means that there may be a long-term bull market rebound.
The combination of Metcalfe's law, a strong technical structure, and rising user activity may drive ETH's momentum throughout the continued rebound.
ETH/USDT daily candle price chart (Binance), source: TradingView.com
This is Metcalfe's Law
According to Pal, the price of ETH in 2017 was the same as BTC, and the market value was the same. If ETH follows the same trajectory as Bitcoin, in the long term, it may rebound sharply.
Whether this will happen is still uncertain, but Pal emphasized the strong similarity between the two. He said: "Similarly, if you didn't read the chart, the price of ETH and BTC in 2017 are exactly the same. They already have the same market capitalization. They seem to be exactly the same in price structure... BTC in 2016 and BTC in 2020 ETH. It’s weird, and it’s all Metcalfe’s law."
Pal explained that this similarity is likely to come from Metcalfe's Law, which states that "the effect of a telecommunications network is proportional to the square of the number of users connected to the system."
As in the early days of Bitcoin, the number of active users of Ethereum has increased exponentially, mainly due to DeFi. In January of this year, the total value locked in DeFi reached US$20 billion for the first time in history. This means that $20 billion worth of capital is deployed in various DeFi agreements.
Total value locked by DeFi, source: Defipulse.com
The rapid growth of the Ethereum ecosystem is mainly due to DeFi. In mid-2020, the total value locked in DeFi is hovering below $1 billion. Since then, this number has increased by 20 times, and DeFi continues to attract more users and capital.
A pseudonymous analyst named "DCinvestor" agreed with Pal's view. He explained that at the beginning of 2017, no one thought that BTC would achieve $20,000. He said: "At the beginning of 2017, no one thought that BTC could reach $20,000. Of course, the market would not care about what people think. This is the supply, demand, and reflexivity. From the signs, everything is developing on a large scale in this cycle. . In 2017, we rarely had funds/billionaires involved."
What will happen next with ETH?
In the foreseeable future, a seamless transition to Eth2 is an important factor to ensure the continued prosperity of the DeFi ecosystem.
In recent weeks, the Ethereum blockchain network has become increasingly congested due to the increasing use of DeFi and the accompanying transaction fees.
ETH has become the top 100 asset by market capitalization. ETH is still about 20% away from its all-time high. Therefore, analysts said that in this bull market cycle, ETH has additional room to rise.
source:cointelegraph