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Ethereum has witnessed much healthier on-chain activity recently, with improved interest in non-fungible-tokens (NFT) led by the launch of a mini-game by Yuga Labs, Bernstein said in a research report Monday.
Daily fees on the blockchain have more than doubled since the start of the year from around $2 million to $4 million-$6 million, the report said. Ether (ETH) has gained around 35% in value.
Bernstein notes that ether inflation has remained negative for over two weeks, with the expectation of further deflation with more on-chain activity and demand.
“We do believe BTC [bitcoin] and ETH remain relatively clean here and will see gradual conviction-based spot positioning,” analysts Gautam Chhugani and Manas Agrawal wrote.
The next big catalyst for Ethereum remains the Shanghai upgrade due in mid-March, when withdrawals of staked ether will be enabled, the note said.
There may be some caution heading into this event because of concerns around supply from the unstaked ether as 70% of the ETH staked has been through liquid staking pools such as LIDO or led by exchanges, the report said.
The remaining ether has been directly staked into the Beacon Chain and is unlikely to be short-term holders. Therefore, there may be caution approaching the event, “but improved conviction in holding in spot markets, as the fears recede,” the report added.
Read more: Deflationary Ether Is Underperforming Bitcoin, Here Are 3 Reasons Why
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