Ethereum Recovers Major Support Level as On-Chain Revenue Surges
Ethereum (ETH) is making headlines again, having reclaimed a critical support level as its on-chain revenue sees signs of recovery. As of Friday, the cryptocurrency has risen over 3%, highlighting the ongoing resilience of the Ethereum network amid an evolving market landscape.
Ethereum’s On-Chain Revenue Growth
Recent reports from Sygnum, a Swiss crypto bank, indicate a positive trend for Ethereum’s revenue growth in September. Here’s a closer look at the details:
- Monthly Revenue Increase: Ethereum’s revenue growth for September has been reported to exceed that of Solana by a staggering 3-4 times.
- Recovery Post Dencun Upgrade: Despite a steady decline in revenue share following the March Dencun upgrade, Ethereum’s revenue began to rebound after a tough August, when on-chain activity saw a significant drop due to market conditions.
Why is Revenue Growth Important?
- Market Confidence: A rise in on-chain revenue is often seen as a sign of renewed market confidence, which can attract new investors.
- Developer Activity: Increased revenue typically correlates with more developer activity and innovation on the platform, further driving its adoption.
- Long-Term Growth Potential: Sygnum notes that while Layer 2 solutions might initially divert business from Ethereum, they can ultimately enhance the main blockchain’s transaction volume and revenue.
The Layer 2 Impact
Ethereum’s ecosystem includes various Layer 2 (L2) solutions designed to improve scalability and reduce transaction fees. Here’s what you need to know:
- Cannibalisation Effect: The recent Dencun upgrade has led to a degree of cannibalization of Ethereum by its Layer 2 solutions, which offer cheaper transaction options.
- Long-Term Benefits: Despite the short-term effects of Layer 2 protocols diverting activity from Ethereum, they may lead to long-term growth by enabling previously economically unfeasible activities.
Vitalik Buterin’s Insights
Vitalik Buterin, co-founder of Ethereum, has expressed optimism regarding the scalability of Layer 1 solutions compensating for fee reductions through increased transaction volume.
Current Market Dynamics
Inflation Rate and Issuance Concerns
As of October 2024, Ethereum’s inflation rate has risen to 0.74%, marking a two-year high in issuance rates. This increase has raised eyebrows among investors, particularly because:
- Market Share Shift to Layer 2: With a significant shift in market share to Layer 2 solutions and low on-chain activity, Ethereum’s gas fees have been reduced, thereby slowing its burn rate.
- Investor Sentiment: Investors are keenly observing these dynamics, as the balance between supply and demand plays a crucial role in price stability.
Market Activity and Price Movement
On Friday, Ethereum was trading around $2,430, representing a notable increase of 3% within the day.
Liquidation Data
- Total Liquidations: In the past 24 hours, there have been $20.9 million in liquidations within the Ethereum market, with long positions accounting for $9.04 million and shorts for $11.86 million. This indicates a volatile market environment.
Support Levels
Ethereum has successfully reclaimed the $2,395 support level after bouncing off a key descending trendline.
- Key Demand Zone: According to data from IntoTheBlock, investors have shown strong interest in ETH, with around 52.3 million ETH purchased in the demand zone between $2,316 and $2,385.
Future Predictions
Ethereum’s price trajectory seems optimistic, with potential to rise to $2,595 if current trends continue.
Monitoring Market Activity
As we move forward, it’s essential to keep an eye on:
- On-Chain Activity: Continued increases in on-chain activity will be pivotal for sustaining Ethereum’s recovery.
- Gas Fees: Observing fluctuations in gas fees can offer insights into investor sentiment and network congestion.
- Layer 2 Developments: Progress and adoption of Layer 2 solutions will likely impact Ethereum’s market position.
Conclusion: A Resilient Future Ahead
Ethereum’s recovery of its major support level, coupled with rising on-chain revenue, indicates a promising outlook for the cryptocurrency. While inflation concerns remain, the long-term potential for Ethereum to regain traction through its Layer 2 solutions is significant.
As always, investors should remain informed and vigilant in this ever-evolving landscape.
