During 2023, Ethereum Layer 2 sector, and more generally the entire blockchain infrastructure landscape, has seen strong growth in terms of new users not in price.
The DeFi sector saw a 52% increase in activity this year, driven by the strong development of the L1 interoperability and scalability platform.
Indeed, Ethereum users seem to prefer decentralised finance to other NFT and gaming activities, with on-chain trend data clearly indicating the dominance of this sector as the first choice of individuals on the network3.
Meanwhile, the speculative cryptocurrency market continues to make progress, with ETH topping $1,900 per unit overnight, only to retreat slightly this morning.
Compared to the beginning of the year, the price of the industry’s second most capitalised crypto has risen sharply, but will this be the case in 2024?
Will Ethereum’s technology be able to dominate and attract the next billion users?
All the answers in this article.
Summary
On-chain data in the Ethereum market and classification of user habits
On-chain data for 2023 shows that the Ethereum infrastructure and its entire ecosystem is booming.
The entire layer 2, bridging platforms and web3 services sector is growing rapidly, with a positive estimate of 149.28% of new users compared to the beginning of the year.
In particular, the niche that seems to be attracting the most attention is that of DeFi, which, as we will see later thanks to the metrics provided by Nansen, has achieved higher user traffic than other decentralised industries.
More specifically, we start collecting on-chain data by looking at the change in the number of active addresses on the Ethereum blockchain over the course of 2023.
As of October 2023, there are over 300,000 entities that have successfully completed at least one transaction, such as transferring assets to another address.
This shows that, despite two turbulent years consisting of price collapses of most cryptocurrencies, global crises and hack attacks on the largest DeFi infrastructures, there is still a user base working on Ethereum on a daily basis.
Trying to go deeper, thanks to Nansen’s custom queries, we can sample active users on Ethereum to understand their attitudes in 2023.
We classify the people in question as
- DeFi users: addresses that have used DEX, lending and yield farming platforms, opened positions with decentralised futures, executed stablecoin payments, exploited yield optimiser or arbitrage protocols, etc.
- NFT scammers: addresses that have participated in NFT auctions, played crypto casinos, roamed the metaverse, invested in NFT liquidity platforms, bet on GambleFi;
- Scaling solution enthusiasts: addresses that have used scaling solutions such as rollups, cross-chain interoperability platforms, bridges, sidechains and L2.
According to the data recorded by Ethereum’s various web3 applications, we can conclude that the majority of active users have made DeFi their primary choice in 2023.
About 92,000 addresses are classified as ‘DeFi users’, while only about 40,000 preferred NT and scaling substrates overall, according to a snapshot from 12 October.
Since March, there has been a strong increase in scaling protocols, supported by the trend of Ethereum rollups and alleged airdrops for early adopters.
In contrast, the NFT niche has lost over 50 percent of its on-chain assets over the past year.
Another way to analyse the regularity of Ethereum users is to look at the FIRST on-chain transaction made by NEW addresses in 2023.
Basically, all wallets that were funded by other entities in 2023 and executed a transaction within 7 days were analysed.
Once again, DeFi seems to be the preferred choice of the crypto world’s degenerate, with the majority of transactions flowing to this sector.
According to data from 12 October, only 17% of new users used Ethereum scaling solutions as their first transaction, but this figure is up on the beginning of the year.
On the other hand, transactions in the NFT market were less frequent, falling from 24% at the beginning of the year to 6% on 12 October.
DeFi confirmed its dominance by recording a significant increase in this metric, with data showing 66% at the beginning of the year and 76% on 12 October.
Ethereum (ETH) price analysis and predictions
As mentioned above, it’s not just Ethereum’s on-chain data that will have supporters of the smart contract platform smiling in 2023, but also the performance of the ETH price, which has risen by more than 50% over the past 10 months.
After starting the year just above $1,200 per unit, the Ethereum coin returned to the $2,000 area around April, then went through a mild distribution phase until the rally of the past three weeks.
Currently, the price of ETH remains firmly above the 50 EMA, suggesting another leg higher before the end of the year.
The RSI is rising on the weekly time frame and there is plenty of room for further upward movement.
The Super Trend Indicator, which has been very useful in predicting the beginning and end of previous bull/bear cycles, has called for a buy around the middle of the year (remember that it arrives a little later than market logic).
If we compare the current phase with that of 2020, when the Supertrend indicated a buy opportunity with ETH at around $250, we could say that we expect at least 4 more months of crypto price rises.
Indicatively, 2024 should be a good year for Ethereum and its cryptocurrency. Next year we can expect the halving of Bitcoin, which is usually the market’s best stimulus, and probably the SEC’s approval of the first crypto spot ETF tradable on US stock exchanges.
In addition, the Fed could also provide a positive boost to the price of Ethereum, with US interest rate forecasts signalling a high probability of quantitative tightening in favour of economic expansion with reduced debt costs.
All in all, the price of ETH is likely to exceed at least $3,000 next year. Several analysts agree that it will surpass its previous all-time high of $4,950.
Despite this, ETH is still suffering in the pair against BTC and is down -25% since the beginning of the year.
This means that so far it has been cheaper to hold bitcoin than ethereum.
It will be interesting to see if this trend starts to reverse with the start of the new year, as it did during the last bull run in 2020.
