Leading altcoin Ethereum (ETH) is well below record levels, and as competitors against the leading network emerge, investors are hesitant to add ETH to the portfolio. RJ Fulton and Dominic Basulto, analysts at US advisory firm The Motley Fool, provide a short- and long-term view by sharing some issues that investors should pay attention to. Here are the details…
Network activity points to demand in largest altcoin ETH
As we reported on Kriptokoin.com, Ethereum reached its all-time high of around $4,900 in November 2021. While it has since dropped significantly, Blockchain is showing a resurgence in activity for the first time in a long time. Analyst Fulton says one of the primary metrics for measuring effectiveness is the rate at which new smart contracts are created.
Ethereum was the first Blockchain to offer smart contracts. It allows developers to program actions that are triggered only when a set of certain parameters are met, eliminating the need for any middleman. Smart contracts are the backbone of many decentralized applications running on Ethereum, and the speed at which they are created can provide valuable insight into how Blockchain is being used. Typically, the use of blockchain is a reflection of demand followed by price action.
We are at the beginning of a long-term trend
It turns out that the number of smart contracts created over the past few weeks could signal a slight departure from Ethereum’s 2022 lows. According to the latest figures from the Messari database, the smart contract creation rate is at its highest level since the bull run in 2021. According to the analyst, perhaps this increase is only related to a renewed sense of hope as the new year has arrived. Perhaps it has to do with the anticipation of Ethereum’s next upgrade, tentatively scheduled for March. While there are numerous reasons for this, the analyst believes it could be the start of a long-term trend.
Also, this renewed level of activity can be seen as representing a bottom for Ethereum’s price. The level of smart contract creation seems to precede price movements. It is worth noting that the number of smart contracts created before Ethereum’s all-time high in November 2021 has increased. While the recovery in smart contract creation has caught the attention of those looking for price fluctuations in the short term, this trend should be watched more closely by long-term investors. In addition, Fulton uses the following expressions:
While this increase doesn’t mean there will be another bull run anytime soon, the increasing rate of smart contract creation should serve as a vote of confidence that development can still happen. After a dire 2022, the optimistic outlook for Ethereum in 2023 will be sustained levels of activity in the network and some sort of price increase. Ideally, a similar stretch would occur from 2019 to 2020, when smart contract creation is high and consistent. If that happens, it could give Ethereum its next leg.
Biggest altcoin may have bottomed out: Does it make sense to buy now?
According to the analyst, investors should use data such as smart contract creation to help paint a clearer picture of long-term trends. This data shows that the tides of smart contract creation come before price movements and can be helpful in gauging network demand. Therefore, he underlines that he is optimistic that with the reviving activity levels, Ethereum’s price may have already bottomed out. “If this is true, buying today seems less risky and more attractive in the long run because for Ethereum the worst may be over,” he says.
So, is it in a good condition to buy ETH right now? According to analyst Basulto, the decision whether to buy Ethereum should be based on your long-term valuation, not the potential for a short-term price increase. According to the Ethereum roadmap, a lot of changes are coming, so there are reasons to be excited for Ethereum in the long run. According to the analyst, “Merge” was a huge technological achievement. Now the Shanghai update is next. However, the analyst said, “If Ethereum didn’t make a big splash after The Merge, why should it live after Shanghai?” says. Moreover, the planned correction for withdrawals could hurt Ethereum’s price in the short term.
The analyst thinks he is optimistic about Ethereum in the long term, but thinks we need to curb our excitement. Buterin has promised more substantial upgrades to Ethereum in late 2023 and in 2024. He also hinted that the full transition to Ethereum 2.0 could take years, not months. By some estimates, we’re halfway there. “If you are considering buying Ethereum, focus on the long-term, not the constant stream of updates,” the analyst concludes.
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