Ether Breaks $2,400 Resistance: What’s Next?

Ether (ETH), the native cryptocurrency of the Ethereum network, has surged past the $2,400 resistance level on Dec. 22, reaching its highest price since May 2022. The second-largest cryptocurrency by market capitalization gained 4% in the last 24 hours, outperforming Bitcoin (BTC) and Binance Coin (BNB), which remained mostly flat.
While the exchange-traded fund (ETF) narrative is widely seen as the main driver of the recent cryptocurrency rally, there are several other factors that support Ether’s price momentum and could potentially push it above $2,500 before the expected ETF approval in mid-January, although the United States Securities and Exchange Commission (SEC) might delay it until March.

Ethereum network DApp volumes and protocol fees
One of the key indicators of the demand for Ether is the activity of decentralized applications (DApps) that run on the Ethereum network. DApps are applications that use smart contracts to execute transactions without intermediaries, enabling various use cases such as nonfungible token (NFT) marketplaces, games, layer-2 bridges, and social networks.
According to DappRadar, Ethereum DApp volumes reached $27.8 billion in the last seven days, marking a 14.2% increase from the previous week. This growth was driven by a 21% gain in Uniswap and a 52% gain in Balancer volumes, two of the most popular decentralized exchanges (DEXs) on Ethereum. In contrast, Binance Smart Chain (BSC), the main competitor of Ethereum in the DApp space, saw its volumes drop by 9.5% to $4.5 billion in the same period, while Arbitrum, a layer-2 scaling solution for Ethereum, amassed another $5 billion. Notably, Ethereum was the only blockchain among the top six to experience a volume increase in the past seven days.
To provide some perspective, Solana (SOL), another fast-growing blockchain platform that hosts DApps, would need to increase its volume by 12 times to reach half of Ethereum DApps’ current transaction volume. Generally, 20% of users account for 80% of the volume, which holds true for DApps as well. Given Ethereum’s first-mover advantage and substantial treasury for ecosystem development support, the odds do not favor a flipping in the short to medium term.
Furthermore, no other blockchain can match Ethereum’s protocol, which generated $95.4 million in fees in the last seven days, excluding Bitcoin, which is not a direct competitor in the DApp ecosystem. These fees are paid by users to the network for processing their transactions and executing their smart contracts. Aside from incentivizing network security, these fees indicate significant potential for increased activity following future updates, including ‘DenCun’ scheduled for January, which aims to enhance processing capacity and reduce costs.
Ethereum spot ETF approval is not priced in according to derivatives markets
Another factor that could boost Ether’s price in the near future is the eventual approval of the Ether spot ETF by the SEC. A spot ETF is a fund that tracks the price of the underlying asset directly, rather than through derivatives such as futures or swaps. A spot ETF would provide a more convenient and cost-effective way for investors to gain exposure to Ether, as they would not have to deal with the complexities and risks of holding or trading the cryptocurrency themselves.
While the SEC has approved several ETFs that track Bitcoin and Ether futures contracts, it has rejected or delayed all applications for spot Bitcoin ETFs, citing concerns about market manipulation and fraud. However, some analysts and industry experts believe that the SEC is more likely to approve a spot Ether ETF than a spot Bitcoin ETF, as Ether is considered less of a threat to the traditional financial system and more of a utility token that powers the Ethereum network.
According to Bloomberg experts James Seyffart and Eric Balchunas, a spot Ether ETF is likely to be approved by May 23, 2024.
However, some ETF issuers are more optimistic and expect a decision by mid-January. BlackRock, the world’s largest asset manager, has recently filed for a spot Ether ETF with Nasdaq, joining other firms such as VanEck, WisdomTree, andGrayscale 23
The derivatives markets suggest that traders are not taking the spot Ether ETF approval for granted, as they are pricing in a significant premium for Ether futures contracts. The Ether futures premium, measuring the difference between two-month contracts and the spot price, has reached its highest level in over a year. In a healthy market, the annualized premium, or basis rate, typically falls within the 5% to 10% range.
The current 13.5% Ether futures annualized premium implies that traders are bullish on Ether and expect its price to rise in the future. During periods of widespread excitement, this indicator tends to exceed 20%, driven by increased demand for leveraged long positions, causing price distortions relative to the spot market. This data implies the potential for a positive price impact in case of approval, whether in January or March.
Based on Ethereum’s network activity, Ether investors are confident
In conclusion, Ether’s price has broken the $2,400 resistance level and is poised to test the $2,500 level, which has not been seen since May 2022. The main catalyst for this rally is the anticipation of the Ether spot ETF approval by the SEC, which could happen as soon as mid-January or as late as March. However, there are other factors that support Ether’s price momentum, such as the high volumes and fees of the Ethereum DApps, which reflect the strong demand and utility of the network. Based on these indicators, Ether investors are confident and optimistic about the future of the cryptocurrency and the platform.