Fidelity Digital Assets published a report titled “Q2 2023 Signals Report” on July 18, stating that the prospects of Ether (ETH) for the next 12 months and the long term are optimistic. Despite the 62% increase in Ethereum’s value year-to-date, the positive outlook of the investment firm does not guarantee the continuation of this upward trend.
To examine the accuracy of Fidelity’s forecast, one must analyze network and market data. According to the report, various factors support the optimistic projection. These include the network’s higher burn rate compared to coin issuance, the rising momentum of new addresses, and the expansion of the network validators. In addition, a Merge in September 2022 resulted in a net decrease in the supply of over 700,000 Ether. Meanwhile, Glassnode data reveals that Ethereum’s adoption is growing, with an increasing number of addresses engaging in transactions for the first time.
Moreover, a 15% rise in active Ethereum validators was reported in the second quarter. There is rising anticipation for the “Dencun” upgrade, which could include the proposed update EIP-1153. This alteration enhances the efficiency of smart contracts, lowers expenses, and strengthens the design of the Ethereum Virtual Machine. This would be beneficial for decentralized exchanges (DEXs) and potentially reduce transaction fees, since Ethereum’s dominance in the DEX market has decreased from 60% to 46% over the past six months.
An upcoming Uniswap v4 could further benefit the Ethereum ecosystem. This upgrade provides users with the ability to create a wide range of pools by utilizing programmable buttons (hooks) and native ETH support. This announcement led to a response from Scott Lewis, the co-founder of Slingshot and DeFi Pulse, as he was surprised that Uniswap Labs kept the details for wanting EIP-1153 secret from the community.
If the EIP-1153 is approved and implemented, it could help Ethereum regain its market share and reduce high gas fees. This is because the average transaction cost has remained above $4 for several months since February. As a result, Ethereum’s total value locked has decreased to its lowest point since April 2020, standing at 13.55 million ETH, according to DefiLlama data. Furthermore, there has been a decline in decentralized application (DApp) activity, as evident from DappRadar’s 30-day data on unique active wallets.