Popular crypto influencer Lark Davis has highlighted some of the reasons why Ethereum could be on the road to $20K.
Among these are massive developments associated with DeFi and NFTs, the upcoming ETH 2.0, and institutional interest in ETH.
Popular crypto influencer and YouTuber Lark Davis has highlighted some of the reasons why Ethereum could be on its way to $20K. For one, Ethereum reserves on central exchanges have recorded a three-year low of 14 million ETH, according to blockchain analysis platform Glassnode. The downward trend began in January this year and has coincided with the rise of ETH above $4,000. This suggests an inverse relationship between Ethereum’s price and the balance stored on central exchanges.
Moreover, the trend suggests that Ethereum users prefer having their holdings in crypto wallets to exchanges. Many exchanges have fallen victim to cyberattacks, with Bitmart being the latest to lose almost $200 million last week.
Another factor contributing to the downtrend is this year’s rise of decentralized finance (DeFi) and non-fungible tokens (NFTs). Users are using their Ethereum tokens to facilitate staking and yield farming on DeFi protocols for passive income. Davis notes that Ethereum has about 9.7 million ETH (8/9 percent of total ETH supply) locked in DeFi. Additionally, about 8.5M ETH has been staked in ETH2.0, which is a relatively low-risk kind of investment, Davis notes. ETH 2.0 is expected to bring a 90 percent reduction in annual ETH emissions. Davis compares this to having “3 Bitcoin halvings at once.”
Additionally, NFT-based games such as Axie Infinity have also taken flight generating billion-dollar yearly revenues. These funds have contributed a notable chunk to the Philippines’ GDP.
Ethereum bullish indicators
Notably, layer-two solutions such as Arbitrum and Polygon have encouraged those put off by high Mainnet gas fees. Polygon once flipped Ethereum mainnet in terms of the number of active users, while Arbitrum recorded $2.7 billion TVL, the highest, in DeFi. Despite the still high fees, Davis says EIP 4488 could see gas prices reduced by a factor of 5.
The weekly chart shows a possible breakout for Ethereum in the near future, something Davis says could narrow the gap between it and Bitcoin in terms of total valuation. Moreover, Ethereum recently surpassed the 1 million token burn threshold. The crypto asset has also been registering “consistent days of negative issuance” owing to EIP-1559.
There are chances of soon increasing the network’s throughput by “a few hundred percent.” This follows an announcement by lead Ethereum developer Vitalik Buterin about sharding coming sooner than anticipated, though in limited proportionality.
Another crucial development is the heightened institutional investor interest, Davis notes. For instance, Cathy Wood-led Arc Invest has 40 percent of its portfolio in Ethereum. An Ethereum futures ETF has also been filed and Coinbase trading volume shows that ETH has been the preferred purchase of big-money players.
Presently, crypto assets, including Ethereum, function better as investments than currencies since they are much more reflexive to demand. However, the more their economies grow, the better the chances of them holding up as currencies. Currently, though, onlookers outnumber actual crypto holders.
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