3 key on-chain metrics suggest Ethereum price is in a 2017-style bull run
The Ether (ETH) price is currently ranging between $440 and $470, similar to its price action seen in December 2017. Back then, the scenario ended up being incredibly bullish, and the altcoin quickly rocketed toward $1,400.
Fast forward to 2020, and some investors believe a similar outcome may occur, as a few key on-chain and technical indicators are mirroring the levels seen in the previous bull run.
On Dec. 10, the Ether price was $450, and it took only 34 days for Ether to reach its all-time high. Before this price explosion, the altcoin traded sideways for over two weeks. If something similar were to happen, on-chain metrics and historical data suggest it could happen over the next ten days.<figure><figcaption style="text-align: center;">Ether in Dec 2017 (left) vs Nov 2020 (right). Source: TradingView</figcaption></figure>
Take notice of how the recent price movements raised investors’ hope that the next crypto bull market will mirror the one seen in late-2017. Although the price is an important metric, it does not provide granularity for network usage and volume.
To assess the size and amount of daily transactions, Coinmetrics provides adjusted transactions and transfers data.<figure><figcaption style="text-align: center;">Ether daily average transactions (left) vs. ETH price. Source: Digital Assets Data</figcaption></figure>
The above chart shows $1.9 billion of the most recent transfers and transactions, a 46% increase from the previous month. Although Ether’s price increase undoubtedly helped, the same effect happened in late 2017.<figure><figcaption style="text-align: center;">Daily average transactions and transfers notional. Source: CoinMetrics</figcaption></figure>
The daily average notional transacted and transferred on the Ethereum network in November 2017 stood at $830 million. This all changed by the end of the month, as the indicator broke the $2 billion mark. This same indicator has strong ties to the current scenario.
To better gauge network activity, one should also analyze the daily number of active addresses. Although it should not be interpreted as the number of active users, it provides a reliable network usage gauge.<figure><figcaption style="text-align: center;">Ether daily active addresses (right) and Ether price (left). Source: Digital Assets Data</figcaption></figure>
November data seems to be repeating the previous month’s peak at 550,000 daily active addresses. This time around, activity appears to be at a much higher level than the late-2017 era.
Of course, one might need to adjust to the growing use of decentralized finance and stablecoins. Yield pools and decentralized exchanges are responsible for tens of thousands of daily transactions involving multiple addresses.<figure><figcaption style="text-align: center;">Ether daily active addresses. Source: CoinMetrics</figcaption></figure>
As one should expect, the number of daily active addresses back in November 2017 stood at 200,000, significantly below today’s number, and managed to increase to 500,000 network addresses per day by the end of the year.
On-chain analytics might have been close enough to the current state, but price action relies heavily on volume. After all, trading activity doesn’t necessarily hold a direct relation to network use.<figure><figcaption style="text-align: center;">Ether average daily volume. Source: Messari</figcaption></figure>
The current $1.3 billion in daily average volume represents a 50% increase from the previous month. This data is remarkable, as it does not include decentralized exchanges.<figure><figcaption style="text-align: center;">Ether daily transparent volume. Source: Messari</figcaption></figure>
Oddly enough, the current Ether volume stands out at the same level seen in Dec. 2017. Therefore, one might conclude that this is too much of a coincidence to be disregarded.
The current daily active addresses, transactions/transfers notional, and traded volume are aligned with the 2017 year-end period when Ether traded near the $450 mark.
For this reason, analysts have solid reasons to believe that a $1,400 bull run is within the realm of possibility within the next few weeks.
Will a renewed decentralized finance frenzy be enough to generate an inflow similar to the one seen during the 2017 initial coin offering era? Or will it be institutional and larger-sized investors who sustain a powerful 300% rally?
As the saying goes, “History doesn’t repeat, but it often rhymes.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
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