3 reasons why Ethereum looks set to rally towards $6K in 2021

Key Takeaways:

• Ethereum’s current bull run has led it to chart new record highs.
• Staking, burning, and hodling are likely to push ETH towards $6,000 price levels.

NEW DELHI (CoinChapter.com) — Ethereum bulls are rejoicing in its current bull run, which has seen the second-largest crypto reach previously unseen highs.

Cryptocurrency intelligence provider IntoTheBlock shared a tweet that predicted a further supply squeeze for Ether(ETH). A decrease in supply would likely boost prices, given the current interest in Ethereum remains constant. Moreover, Ethereum’s recently introduced burning mechanism would likely bring deflationary tides for ETH.

EIP-1559, implemented in Aug, introduced a real-time burning mechanism for Ether. At present, the mechanism has burned more than 829,097 ETH, with a present value of $3,913,446,350.12. Analysts predict the burn mechanism would likely make ETH a deflationary token in the time to come.

#1 Ethereum staking contract

Staking is a passive way to earn rewards. It involves locking crypto assets, providing stakers the ability to manage a blockchain. The total amount of Ether locked in Ethereum’s 2.0 staking contract hit 8.2 million ETH, worth $38.6 billion, thus constituting 6.9% of eligible tokens.

Recommended: Ethereum’s first week of deflationary issuance sees ETH hold above $4.3K.

Staking removes ETH from the active supply, thereby increasing prices if demand for the crypto doesn’t change. However, considering the increasing number of Ethereum unique addresses, it seems likely the current bull run has attracted more investors to Ethereum.

As such, with more investors choosing Ethereum and increased staking, it is likely Ether would continue to be bullish in the long term.

#2 DeFi

Decentralized Finance, or DeFi, is a term for various financial applications in cryptocurrency and blockchain that aim to disrupt traditional financial intermediaries. Interestingly, most DeFi applications use the Ethereum platform. As per data from DappRadar, the TVL in Ethereum DeFi Projects now stands at $146.75 billion.

DeFi is a steadily growing field, accounting for a total market cap of $195.25 billion, with other projects like Terra and Avalanche gaining momentum. The ETH staked in DeFi projects further reduces the token’s active supply in the market, leading to a supply squeeze and resulting in price gains.

Also Read: Ethereum triggers an altcoin recovery wave, as ETH hits a new ATH at $4.6K

However, DeFi still suffers from certain issues, such as security issues. According to recent data, DeFi protocols have lost nearly $1.4 billion to hacks.

As the DeFi sector grows, participation from more developers would likely lead to better security. But, for now, Ethereum’s influence in the DeFi sector is strong, and the sector’s continued growth would likely provide more bullish fundamentals to propel ETH prices higher.

#3 ETH on exchanges

Furthermore, the amount of ETH reserves on exchanges has decreased by 902,404.3663 ETH between Oct 1 to Nov 9. In detail, a decrease in exchange reserves highlights a hodling mentality as investors move their crypto assets from centralized exchanges into personal wallets.

In addition, removing from exchanges also reduces the active ETH supply in the market. As such, Ethereum’s declining exchange reserves highlight that ETH bulls expect prices to rise further.

Ethereum’s current bull run would welcome the supply squeeze brought on by these factors. Moreover, Ethereum translating to Proof-of-stake in the early second quarter of 2022 would also bring many new projects to the network. As such, a $6,000 price mark by 2021 end seems like a very achievable target.

At the time of writing, ETH was trading at $4,715, down 0.38% on the day, with an RSI of 65.72.