Ether price is attempting to conquer $2,000 as the Ethereum blockchain is seeing increasing demand.
There are three key reasons behind the explosive rally of Ether, namely the rapid growth of DeFi, the hype around ETH after the CME futures listing, and the decreasing amount of BTC and ETH on exchanges.ETH/USDT 4-hour price chart (Binance). Source: TradingView.com
Ether hitting $2,000 for the first time ever follows the launch of CME ETH futures earlier this month, which primarily target institutional investors.
Prior to the listing, there was a popular narrative that the CME listing would cause the price of ETH to decline significantly, because the CME Bitcoin futures listing in 2017 coincided with the local BTC top at the time.
However, ETH has continuously rallied since, breaking past its all-time high and surpassing $2,000 on Feb. 20. The new milestone indicates that there is currently significant institutional hype around ETH, which is also evidenced by Grayscale's Ethereum Trust resuming the buying of ETH in February.
According to data from Dappradar.com, the total value locked (TVL) of the DeFi market is almost $50 billion.Defi total value locked. Source: Dappradar
The term TVL is used to measure the amount of capital that is locked up in every DeFi protocol. For instance, if $2 billion are being used on a lending protocol to borrow or loan money, that would mean the TVL of the protocol would be $2 billion.
ETH directly benefits from the high TVL of the DeFi market because ETH is used as a means to pay transaction fees on the Ethereum blockchain network.
Hence, the higher the demand for DeFi protocols and services, the more it benefits the value of ETH in the market.
Meanwhile, the price of Bitcoin is showing no signs of slowing down as it breached $57,000 and is holding the $50,000 area as a solid support level. Part of the reason for this is the decreasing amount of BTC as well as ETH that's available on exchanges, which reduces sell pressure.ETH exchange reserve (red) vs. ETH price (black). Source: CryptoQuant
In addition, as long as the price of Bitcoin continues to demonstrate resilience above $50,000, the strong momentum of ETH would likely be sustained in the foreseeable future.
According to analysts at Santiment, there is also significant interest in Ethereum among the crypto community. When the price of ETH surpassed $2,000, 33% of all crypto discussions were related to ETH. They wrote:
"Well #Ethereum over $2,000 happened quickly, as prices rose all the way up to $2,041 just an hour after our article posted! Address activity is up to one-month high levels. And 33% of all #crypto discussions were related to $ETH when history was made."
If the momentum of the dominant cryptocurrency in Bitcoin remains intact and investors keep pulling ETH from exchanges, the probability of Ether continuing its rally past the $2,000 level is likely to increase.