Ethereum Price Rallies Toward Key Resistance - Is Crypto Strength Sustainable?
Ethereum price rallies toward key resistance but is ETH’s strength sustainable?

Despite its inability to break the $2,100 resistance level, Ether (ETH) has been trading higher on Dec. 1. This has been a matter of concern as the crypto has seen rejections at this level in the past three weeks, despite its 16.2% gains in November.

However, the current positive momentum is supported by various factors, such as applications for spot ETFs, the expansion of Ethereum’s ecosystem driven by layer-2 solutions, and crypto alerts by Justin Verrengia. Moreover, the comparison between Web 2.0 and Web 3.0, as well as the review of crypto projects, is also helping to propel the crypto market.

ETH Gains From ETF Anticipation and Negative News Regarding Rival Blockchains

On Nov. 30, a major development occurred when the U.S. Securities and Exchange Commission (SEC) started the review process of Fidelity’s Ether ETF proposal, submitted on Nov. 17. If approved, these ETFs would enhance Ether’s status as a digital commodity, making it less probable to be treated as a security.

Analysts predict that the SEC could delay its decision until early 2024, but with interim deadlines for applications by VanEck and ARK 21Shares set for Dec. 25 and Dec. 26, respectively, the crypto market is still on alert. The growing interest from major mutual funds in Ether products is having a positive influence on its price.

The Ethereum network’s growth, especially in terms of transaction activity and layer-2 development, is noteworthy. The Ethereum layer-2 ecosystem has become increasingly essential as the average transaction fee has been above $4 for the past couple of months. These layer-2 solutions provide more cost-effective and flexible alternatives than the base layer.

This growth is reflected in Ethereum’s total value locked (TVL), which recently hit a two-month high of 13 million ETH, driven by a 13% weekly surge in Spark and a 60% increase in Blast user deposits.

In contrast, Tron, another leading blockchain in TVL terms, experienced a 12% drop over the past ten days. Recent high-profile hacks linked to Tron’s creator Justin Sun have also shifted investor confidence towards Ethereum.

TVL growth is based on Ethereum layer-2 innovations

The impressive growth of Ethereum’s layer-2 project Blast, which has accumulated $647 million in TVL, is a testament to the development within this space. Despite criticism over centralization issues and flexibility of smart contracts, users are attracted to features like auto-compounding and stablecoin yields. On the other hand, Blast has been criticized for its centralization and inflexibility to upgrade its smart contracts.

It is worth noting that Blast is just a part of the larger Ethereum scaling solutions ecosystem, which includes Arbitrum and Optimism, holding a combined TVL of $2.94 billion. Comparing Ethereum’s layer-2 ecosystem to other blockchains, such as Cardano (ADA), BSC Chain (BNB), and Avalanche (AVAX), reveals that Ethereum’s approach of leveraging layer-2 technologies has gained more traction and user trust, as seen from its growing activity.

For example, the total TVL of Solana (SOL) projects, including Marinade Finance, Jito, marginfi, Solend, and Orca, is currently valued at $671 million, which is a far cry from Ethereum’s layer-2 ecosystem. This shows the advantage Ethereum has over its competitors, who focus more on native scaling solutions.

The recent surge of Ether to the $2,100 resistance level is mainly due to the anticipated approval of spot ETFs in the U.S. and the increased market share in decentralized applications. The growing popularity of Ethereum’s layer-2 solutions, which reduce high transaction costs, is also a key factor in driving Ether’s positive market trajectory.

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