Fidelity Crypto Survey Reveals 47% of Investors Expect Ethereum to Surpass Bitcoin

Fidelity Digital Assets released a “Q2 2023 Signals Report” on July 18, which claimed that Ether’s outlook for the next 12 months and the long term is positive. Year-to-date, Ether (ETH) has gained 62%, but while the investment firm might be short-term bullish on Ether, that does not mean it believes that the month-long bullish channel will be sustained.

While institutional investors like Fidelity Digital Assets may have a bullish longer-term vision for ETH’s price, let’s compare their analysis against network and market data to see if they’re on the money. Beyond the technical indicators, the rationale behind Fidelity’s bullish outlook for Ether is the network’s higher burn rate versus coin issuance, the “new address momentum” and a growth in the number of network validators.

According to the Fidelity report, the net issuance since the Merge in September 2022 resulted in a net supply decrease of more than 700,000 Ether. Additionally, the analysts claim that Glassnode data showing an increasing number of Ethereum addresses that transacted for the first time ever proves healthy crypto adoption.

The report also points to a 15% increase in the number of active Ethereum validators in the second quarter.

The expectation around EIP-1153 is also building momentum for the Ethereum network, as the “transient storage opcode” improves smart contract efficiency, reduces costs and amplifies the Ethereum Virtual Machine web 3.0 design. The change is especially meaningful for decentralized exchanges (DEXs), where Ethereum’s dominance declined to 46% from 60% six months prior, according to DefiLlama data.

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Dencun upgrade expected to reduce transaction costs

The Ethereum network may experience a boost thanks to the upcoming Uniswap v4 upgrade. According to a presentation at the Ethereum Community Conference on July 17, the new version of the leading DEX will feature programmable buttons (hooks), native ETH support and a singleton contract that will execute internal transactions before settling final balances.

This potential advancement has been welcomed by Scott Lewis, co-founder of Slingshot and DeFi Pulse, as it is likely to be included in the upcoming Dencun upgrade. If this is the case, Ethereum will be able to recover its market share, which has been affected by high gas fees. Currently, the seven-day average transaction cost is over $4, and the total value locked has reached its lowest level since April 2020, at 13.55 million ETH, according to DefiLlama.

In addition, decentralized application activity has decreased, as DappRadar’s unique active wallets’ 30-day data shows. Uniswap, 1inch Network, MetaMask Swap and OpenSea have all experienced a decrease of 28%, 14%, 8% and 5% respectively. In comparison, BNB Smart Chain’s PancakeSwap has gained 10%, and Polygon’s Uniswap users have increased by 8%.

Derivatives metrics remain flat

The premium of Ether’s quarterly futures has been signaling a lack of enthusiasm among professional traders. Typically, these fixed-month contracts trade at a 5% to 10% premium compared to spot markets, a situation referred to as contango.

Data from Laevitas reveals that the Ether three-month futures premium is currently at 4%, lower than the 5.5% level seen on July 14 and below the neutral threshold. This is a clear sign that traders are not as interested in leveraging bullish ETH positions.

Moreover, the 59% gains year-to-date of Ether may have led to an excessive optimism. A survey from CryptoVantage of 1,000 North Americans who have invested in cryptocurrencies in the past five years showed that 46% named Ether as the coin they think will surpass Bitcoin (BTC).

Although the survey did not ask whether any coin would eventually flip Bitcoin, the results might be misleading. Fidelity’s analysis has provided valid reasons for their bullish outlook of Ether’s 12-month price performance, however, the high gas fees and lack of leverage buyers in the short term may increase the chances of the Ether price breaking below the channel support.