Ethereum’s Ether rose to $5,000 on rising demand

Investor demand, on-chain metrics and network activity are leading Ether (ETH) to hit $5,000 for the first time, CryptoQuant analysts said in a report.

Ether spot ETFs posted a 13-day inflow streak on Wednesday, reaching nearly $2 billion in cumulative net inflows. The funds raised their first billion from July to early December, but data from SoSoValue shows it took them just five trading days to raise the next billion.

The total number of daily transactions has hovered between 6.5 and 7.5 million in recent months, compared to around 5 million in 2023, indicating higher network activity.

Meanwhile, the total supply of ETH has reached its highest level since April 2023, but the amount of ETH burned through fees has been increasing since September. The total supply of ETH has reached 120 million, which is the highest level since April 2023.

Burns refers to permanently removing tokens from circulation by sending them to a wallet that no one controls. As the network experiences higher activity and demand, the burn rate increases, limiting the growth of ETH supply and creating deflationary pressures.

Higher network activity on Ethereum means increased usage and demand for the network’s capabilities and reflects the increasing adoption of decentralized applications. Additionally, this results in more ETH being burned via transaction fees, which can create deflationary pressure on the overall ETH supply as the burn rate can exceed issuance during periods of high activity.

These factors have led ETH to return to its all-time highs starting in 2021 and beyond.

“ETH could rise above $5,000 if current demand and supply dynamics continue,” CryptoQuant said. “According to ETH’s realized price – the average price at which holders purchased their ETH – the current cap on the price of ETH is around $5.2k.”

“This cap marked the peak for ETH in the 2021 bull market. However, as new market participants purchase ETH at higher prices, this upper price range continues to rise,” they added.

Ethereum’s recent price surge has significantly increased the total value of assets locked in its ecosystem, reaching $77 billion on Thursday, its highest level since January 2022.

The lion’s share of these assets are managed by just three key applications: Lido, which dominates with over $38 billion in Ether staked, making it the largest liquid staking protocol; Aave, with $19 billion spread across various assets, acts as a lending platform; and EigenLayer, a restaking platform that holds $18 billion.

The Ethereum network saw a notable increase in several key metrics in November. There was an increase in revenue, transaction fees, new wallet creations and on-chain volume, all pointing to increased activity compared to the quieter months of May to September, as previously noted in an analysis by CoinDesk.

Ether has largely underperformed Bitcoin and other major tokens since 2022, but saw a return of bullish sentiment after Donald Trump won the US presidential election in November, reigniting hopes of a DeFi bull run among investors.

Trump’s campaign has signaled a possible easing of regulatory pressure on cryptocurrencies, which could make it easier for DeFi platforms to operate in the country. This expectation has been a catalyst for increasing demand for ETH and has fueled the growth of major DeFi tokens since early November.