Ether’s price rally is backed by the Ethereum network activity

To assess whether Ether’s price gains in February are backed by sustainable demand for ETH, one should monitor the Ethereum network’s on-chain activity. The network’s smart contract deposits, measured by the total value locked (TVL), reached an 11-month high on Feb. 9 at 16 million ETH, marking a 19% increase from the previous month. However, most of the surge occurred on the EigenLayer liquid staking solution, which jumped to a $5.85 billion TVL on Feb. 9, up from $1.15 billion the previous month.
Other noteworthy mentions encompass the liquid staking applications Mantle LSP and Ether.fi, along with the yield farming service Pendle. Importantly, the Ethereum network has maintained its status as the absolute leader in fees, serving as a proxy for effective demand. To illustrate, Ethereum’s $10.4 million in fees over 24 hours is eight times larger than Tron’s and more than 12 times higher than BNB Chain's, as reported by DefiLlama.
Beyond Ethereum’s existing use cases, another source of optimism for Ether investors lies in a potential new nonfungible token format dubbed ERC-404. This method would allow fractionalized capabilities within the current ERC-721 standard. Although in its initial stages, this promising proposal could enhance sector activity and further stimulate demand for ETH. Additionally, the eagerly awaited Dencun network upgrade is scheduled for March 13, bringing benefits such as reduced transaction costs for layer-2 rollups.
Considering the potential interest from fixed-income investors seeking alternatives to stocks and the ongoing growth and development of the Ethereum network, Ether investors are clearly not feeling apprehensive about the recent 10% price gains or the $2,650 resistance, and compared with Ether’s last test of it on Jan. 11, the price action appears stronger.
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