How Crypto Regulation Could Help ETH Rally Above $2,500

Ether (ETH) recently attempted to breach the $2,400 resistance on Dec. 9 but failed, resulting in a retest of the $2,120 support level. This time, investors are gaining confidence that they can surpass this level, entering an area that has not been seen since May 2022, prior to the Terra ecosystem’s collapse. On Dec. 22, Ether saw a 4% boost, while Bitcoin (BTC) and BNB (BNB) stayed mostly unchanged.

Although the focus is on the exchange-traded fund (ETF) narrative as the main cause of the recent crypto gains, there are a few other factors that are aiding Ether’s price surge and could potentially push it past $2,500 before the anticipated ETF authorization in mid-January, even though the US Securities and Exchange Commission (SEC) might not give the green light until March.

Ethereum network DApp volumes and protocol fees

Analyzing the demand for Ether through decentralized applications (DApps) activity is a more reliable way to understand the trends in the fast-paced cryptocurrency industry, rather than trying to predict the future. Examining DApp volumes is a good starting point, as some sectors such as nonfungible token marketplaces, games, layer-2 bridges and social networks do not require a large total value locked (TVL).

In the last seven days, Ethereum DApp volumes amounted to $27.8 billion, which is a 14.2% increase compared to the previous week. This growth was mainly due to the 21% gain in Uniswap and the 52% gain in Balancer volumes. BNB Chain’s volumes for the same period were $4.5 billion, while Arbitrum registered another $5 billion. Notably, Ethereum was the only blockchain among the top six to experience a volume increase in the past seven days.

To illustrate, Solana (SOL) would need to multiply twelvefold to reach half of Ethereum DApps’ current transaction volume. Generally, 20% of users account for 80% of the volume, which is true for DApps. Taking into consideration Ethereum’s first-mover advantage and its substantial treasury for ecosystem development support, it is unlikely for this situation to change in the short to medium term.

Moreover, no other blockchain can match Ethereum’s protocol, which generated $95.4 million in fees in the last seven days, with the exception of Bitcoin, which does not compete in the DApp ecosystem. This data shows the potential for increased activity following future updates, including the ’DenCun’ update planned for January, which is designed to improve processing capacity and reduce costs.

Ethereum spot ETF approval is not priced in according to derivatives markets

The latest crypto regulation today has brought attention to Ether, as opposed to other cryptocurrencies, as regulators have taken notice of certain exchanges offering securities brokerage and services without proper registration.

Investors should pay attention to Ether derivatives traders, especially large investors and market makers, as the Ether futures premium, which measures the difference between two-month contracts and the spot price, is currently at its highest level since May 2022. The annualized premium, or basis rate, is normally between 5% and 10%, but is currently at 13.5%. This suggests that traders are not taking the spot Ether ETF approval for granted.

The Balancer crypto platform’s activity suggests that investors should not succumb to the pressure of competitors gaining momentum, as Ethereum is near its highest level since May 2022. This implies that investors are confident in its ability to break above $2,500.