According to data from blockchain analysis company CryptoQuant, although Ethereum has lagged behind Bitcoin, if its current supply and demand dynamics continue, the second-largest cryptocurrency by market capitalization could reach a historic high of over $5,000 next year.
Ethereum has risen over 72% this year. While its performance is still impressive compared to many traditional assets, it clearly lags behind Bitcoin, which has risen 147% so far this year.
Bitcoin has recently reached new historical highs, surpassing $100,000, while the trading price of Ethereum remains over 19% lower than its historical high of $4,865 set in November 2021.
However, according to calculations by CryptoQuant analysts, if the current supply and demand dynamics for Ethereum persist, the cryptocurrency could reach a historic high of over $5,000 next year.
According to data from the crypto analysis platforms Coinglass and The Block, Ethereum exchange-traded funds (ETFs) have seen inflows for 17 consecutive trading days.
According to data from CryptoQuant, as of last Friday, Ethereum ETFs held a total of 3.5 million Ethereum, setting a new historical high. This is up from 3.1 million when the Ethereum spot ETF products were approved for listing in July, and higher than the 2.72 million low in September.
Meanwhile, CryptoQuant analysts noted in a recent report that while Ethereum's total supply is at its highest level since April 2023, the amount of Ethereum destroyed through transaction fees has been on the rise since September, indicating that the growth of the cryptocurrency's supply has been slowing.
Since the upgrade in 2021, Ethereum has introduced a destruction mechanism to permanently remove a certain amount of Ethereum from circulation, aimed at reducing supply by destroying part of the Ethereum to curb inflation.
Total supply and destruction of Ethereum
Youwei Yang, chief economist at BIT Mining, stated that to see the next progress for Ethereum, a key factor is increased regulatory clarity, particularly regarding the classification of staking. Ethereum staking refers to the process where holders lock up Ethereum to secure the Ethereum blockchain and earn rewards.
Current Ethereum ETFs do not stake the held Ethereum, which is a concession from the issuers due to the related regulatory uncertainties.
In June of this year, the U.S. Securities and Exchange Commission (SEC) sued Ethereum software provider Consensys, accusing the company of being an unregistered broker. The SEC claims that Consensys provides and sells unregistered securities on behalf of liquidity staking program providers Lido and Rocket Pool, which create and issue liquidity staking tokens in exchange for staked assets. While staking tokens are typically locked and cannot be traded or used during the staking period, liquidity staking tokens can be freely bought and sold.
"With the Trump administration, which is supportive of crypto and has less regulation, likely returning, there is optimism that clear guidance on crypto regulation (including Ethereum staking) will emerge after its inauguration in January next year. This could pave the way for institutional and traditional financial participants to adopt Ethereum staking, enhancing its long-term appeal as an income-generating asset," Yang wrote in an emailed comment.
Article reposted from: Jinshi Data
