Ethereum’s (ETH) path back to $2.5K depends on 3 key factors

Ether (ETH) price reclaimed the $2,000 support on March 24 but remains 18% below the $2,500 level seen three weeks ago. Data shows Ether has underperformed the altcoin market by 14% over the past 30 days, leading traders to question whether the altcoin can regain bullish momentum and which factors might drive a trend reversal.

Ether/USD (left) vs. total altcoin capitalization, USD (right). Source: TradingView / Cointelegraph

Ether appears well-positioned to attract institutional demand and significantly reduce the FUD that has limited its upside potential. Critics have long argued that the Ethereum ecosystem lags behind competitors in overall user experience and still offers limited base-layer scalability, which has negatively impacted network fees and transaction efficiency. 

Many of the Ethereum network’s challenges are expected to be addressed in the upcoming Pectra network upgrade, scheduled for late April or early June. Among the proposed changes is a doubling of the data that can be included in each block, which should help lower fees for rollups and privacy-focused mechanisms.

Additionally, the cost of call data will increase, encouraging developers to adopt blobs—a more efficient method for data storage.

Another notable improvement in the upcoming upgrade is the introduction of smart accounts, which allow wallets to function like smart contracts during transactions. This enables gas fee sponsorship, passkey authentication, and batch transactions.

Additionally, several other enhancements focus on optimizing staking deposits and withdrawals, providing greater flexibility, and extending block history for smart contracts that rely on past data.

Arthur Hayes, co-founder of BitMEX, set a $5,000 price target for ETH on March 25, stating that it should significantly outperform competitor Solana (SOL).

Source: CryptoHayes

Regardless of the rationale behind Arthur’s price prediction, ETH options traders do not share the same bullish sentiment. The Sept. 26 call (buy) option with a $5,000 strike price costs only $35.40, implying extremely low odds.

However, Ethereum remains the undisputed leader in smart contract deposits and is the only altcoin with a spot exchange-traded fund (ETF) in the US, currently holding $8.9 billion in assets under management.

Ethereum’s network boasts a total value locked (TVL) of $52.5 billion, significantly surpassing Solana’s $7 billion. More importantly, deposits on the Ethereum network grew 10% over the past 30 days, reaching 25.4 million ETH, while Solana saw an 8% decline over the same period.

Notable highlights on Ethereum include Sky (formerly Maker), which saw a 17% increase in deposits, and Ethena, whose TVL surged by 38% in 30 days.

Ether balance on exchanges, ETH. Source: Glassnode

The Ether supply on exchanges stood at 16.9 million ETH on March 25, just 3.5% above its five-year low of 16.32 million ETH, according to Glassnode data. This trend suggests that investors are withdrawing from exchanges, signaling a long-term capital commitment.

Similarly, flows into spot Ether ETFs remained relatively muted on March 24 and March 25, in contrast to the $316 million in net outflows accumulated since March 10.

Related: Ethereum devs prepare final Pectra test before mainnet launch

Lastly, the Ethereum network is gaining momentum in the Real World Asset (RWA) industry, particularly after the BlackRock BUILD fund surpassed $1.5 billion in capitalization.

The Ethereum ecosystem, including its layer-2 scalability solutions, accounts for over 80% of this market, according to RWA.XYZ data, underscoring Ethereum’s dominance in the decentralized finance (DeFi) space.

Ether’s price drop below $1,900 on March 10 likely reflected overly bearish expectations. However, the tide appears to have turned as the Ethereum network demonstrated resilience, and traders continued to withdraw from exchanges, setting the stage for a potential rally toward $2,500.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.