Ethereum Network’s Activity Remains Positive After Dencun Hard Fork
After the successful launch of the Dencun hard fork on the Ethereum network, positive activity and supply dynamics have been observed. The Dencun upgrade, implemented on March 13, aims to reduce transaction fees on Ethereum-based layer-2 networks through proto-danksharding. This mechanism expands data blob capacity to improve scalability.
Since the launch of Dencun, the total supply of ETH has continued to decline, reaching its lowest level since August 2022. The current total ETH supply is 120.09 million, with a seven-day average decrease of -5,000 ETH. This decline is attributed to the burning of transaction fees that exceed the base network fee.
The Ethereum network has experienced a surge in activity, resulting in high transaction fees and daily transfers. Daily transactions have reached levels not seen since May 2023, and over one million ETH transfers are occurring each day.
Risk of Price Correction for Ether
Despite positive on-chain metrics, such as high network activity and a significant number of staked ETH, analysts warn of a potential price correction for Ether. The asset is currently at its most expensive level since December 2021, indicating a possible price retreat.
The MVRV ratio for ether stands at 2.0, suggesting that its value is twice its average on-chain purchase price and that ETH holders have a 50% unrealized profit. The last time the MVRV ratio was at this level was in November 2021 when ether was valued at $4,693.
At the time of writing, ETH has experienced a decline of over 6% and is trading below $3,700.
Conclusion: Ethereum Faces Short-Term Risks Despite Positive Network Activity
The Ethereum network has shown positive activity and supply dynamics following the launch of the Dencun hard fork. However, despite these favorable indicators, there are potential risks for Ether in the short term.
Key points to consider include:
- The total supply of ETH has decreased to its lowest level since August 2022.
- Transaction fees on the Ethereum network have led to a significant burning of ETH, contributing to the supply decline.
- Network activity has surged, with daily transactions and transfers reaching levels not seen in years.
- Over 31.7 million ETH are currently staked, representing approximately 26% of the total ETH supply.
- Despite these positive metrics, analysts warn of a potential price correction for Ether due to its high valuation and MVRV ratio.
Hot Take: Ether’s Price Correction Looms Amidst Positive Network Activity
Ethereum’s recent hard fork and subsequent positive network activity have created an optimistic outlook for the cryptocurrency. However, caution is advised as potential risks may lead to a price correction for Ether in the short term.
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