One of the curious questions in the cryptocurrency market is which altcoin project will lead the next bull. Last year, we saw the disappearance of tokens such as Solana, FTX Token, Terra, CEL. Consulting giant Fool analysts are evaluating altcoins that can be bought in this environment where prices are falling.
This altcoin could lead the next bull
Fool analyst RJ Fulton says there are two factors that make Ethereum a bearish buyable altcoin. Both help us understand a simple but fundamental dynamic in supply and demand in the price of Ethereum. The first would be to look at the number of unique addresses on the network. Today, it’s over 171 million, an all-time high, and it’s growing even in the current crypto winter.
But since the primary use of Ethereum is derived from its smart contracts, the number of smart contracts created can provide more detailed information about the activity and demand on the blockchain. Looking at the number of new smart contracts, one thing immediately becomes clear: The network is booming.
After more or less inactivity for most of 2022, there was an increase in the number of smart contracts created in the fourth quarter of 2022. On December 31, 2022, the year’s high was reached when around 140,000 new smart contracts were deployed. This is a level not seen since the summer of 2021 before Ethereum hit the ATH level.
This activity continued in the new year and may signal that Ethereum is reviving once again and demand is increasing. While this is welcomed news after Blockchain barely recorded more than 20,000 days for most of 2022, more important are the dynamics around Ethereum’s supply.
Network development is another factor that supports Etehreum
In August 2021, Ethereum developers performed an upgrade on the network, known as the London hard fork. This upgrade laid the foundation for Merge, a later upgrade that will transform Ethereum from business PoW to PoS.
As a result of the London hard fork, a new burn mechanism has been introduced that will permanently remove Ethereum from its circulating supply and turn Ethereum into a deflationary asset. Up until this point, Ethereum’s inflation rate was around 3.5% and unlimited ETH could circulate. Unlike inflationary assets that struggle to maintain their value, deflationary assets usually increase in value over time.
The primary reason Ethereum looks so appealing today is the dwindling token supply. Now that it has finally entered a period of deflation, investors can really start to reap the benefits of the London hard fork and Merge. While its price is still quite far from its all-time high, allocation at today’s levels could create a portfolio for long-term success.
Why Ethereum? Analysts offer 3 reasons
For starters, we cannot talk about Ethereum without discussing one of the unique aspects of this cryptocurrency: It is constantly evolving. Ethereum’s ultimate goal is to be “strong enough to help all of humanity” and it has a concrete and detailed roadmap for how to get there.
Upgrades like London and Shanghai are just small steps in realizing Ethereum’s ultimate vision. In fact, Ethereum is only 60% complete. After the much-anticipated Merge went live in September, the Ethereum co-founder found that there is still 40% left for the blockchain to reach its full potential.
cryptocoin.com We’ve included what you need to know about the Shanghai upgrade in this article.
Ethereum enters a new era
While the Merge dominated the headlines for much of 2022, there was an older, more significant upgrade that drew little attention. Known as the London hard fork, this upgrade became available in August 2021 and laid the groundwork for Merge. Presumably, Ethereum’s price can do more than The Merge itself.
With the implementation of the London hardfork, Ethereum actually became a deflationary asset. The details may be a bit complicated, but in essence, the London hardfork enabled more ETHs to be burned and removed from circulation as Ethereum usage increased. Prior to the London hardfork, Ethereum’s annual inflation rate was around 3.5%. However, now Ethereum is actually deflationary and has a -0.48% rate.
The new “burn” feature does so in such a way that the rate at which ether enters the circulation not only slows down, but at times even reduces the overall supply. As a result of the London hardfork, Ethereum’s price has entered a new era that will be subject to limited supply and increased demand.
Single leader
At one point, Ethereum supported more than 90% of the entire DeFi economy. While this share has dwindled with the rise of new DeFi-enabled blockchains, they have little or no chance of displacing Ethereum as the DeFi leader. Today, Ethereum accounts for around 60% of the total value in DeFi and is valued at more than $30 billion. The next closest competitor is Tron with $5 billion.
As Ethereum is still a work in progress and continues to evolve to meet the needs of its users, it is likely that any other blockchain that wants to surpass Ethereum will face an increasingly difficult task. With each new upgrade, Ethereum will only become more useful and one step closer to its ultimate vision of supporting the world.
It is this combination of proven dominance and a clear vision for the future that sets Ethereum apart from other altcoin projects today. If it achieves its ultimate goal of “supporting a digital future on a global scale”, it could cure investors for decades.
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