Last week, the price of Ethereum’s native token ether (ETH) went above $3,000 for the first time since April 2022. The token continued to wobble around that mark before breaking through, standing at nearly $3,260 on Tuesday. What’s the next price milestone for the world’s second-largest digital asset by market cap? 

Stablecoins as a Bullish Indicator

One way to predict the new capital inflows into ETH is through stablecoin issuance, Patrick Doyle, blockchain researcher at crypto analytics firm Amberdata, told Unchained in an email. Doyle noted that roughly $3.5 billion in new Ethereum-based stablecoins, led by USDT and USDC, have been issued on Ethereum since the beginning of 2024. The growth from the $67 billion worth of stablecoins in January to the current $70.5 billion marks a 5% year-to-date growth.  

“New stablecoins being issued onchain is a bullish indicator for all assets in the crypto space. Confidence in the crypto space is slowly being restored,” he explained. “Traders and investors are starting to bring capital back onchain which means they plan to deploy/invest that capital in a number of crypto assets.” 

Read More: Why Has Bitcoin Rallied More Than Ether in 2023?

“With conversations of an ETH ETF in the works, it wouldn’t be unlikely to see ETH run past $3,500 leading into Q2,” Doyle continued.

Eight firms have filed applications for spot Ethereum exchange-traded funds (ETFs) with the U.S. Securities and Exchange Commission. The regulator approved the first spot bitcoin ETFs in January, which topped $625 million in inflows just on the first day of trading. The trading success of those ETFs helped push the price of bitcoin higher. BTC briefly passed the $57,000 mark on Tuesday, the highest level in two years, according to CoinMarketCap data

‘ETH as a Store of Value Is Essential for Proof of Stake’

A price premium for ETH has more implications than just providing profits for traders. The price is important to the future of the blockchain itself, Alejo Pinto, co-founder and chief growth officer at Web3 product development studio Pontem, told Unchained in an email.  

“The monetary premium for ETH as a store of value is essential for proof of stake to work fundamentally,” said Pinto, referring to the consensus method that Ethereum shifted to in Sept. 2022. “Bitcoin is secured by physics, Ethereum is only secured by our collective belief that Ethereum is worth protecting. If ETH is worthless then there is nothing at stake.”

Supply and demand dynamics are also at play following the blockchain’s EIP 1559 upgrade in 2021 that changed how network fees are calculated and processed. 

“The narrative for ETH as a store of value through supply/demand dynamics is strong. After EIP 1559, gas from using the chain gets burned, which creates a deflationary mechanism for the token. This could prove even more powerful than BTC’s fixed supply long term,” Pinto continued. 

Bitcoin has a hard cap of 21 million BTC that can ever be created, creating a fixed supply. The deflationary mechanism for Ethereum is another way to achieve scarcity, reducing supply and potentially driving up the token’s value over time. 

Read more: Spot Ether ETFs Could Introduce New Concentration Risk in Ethereum: S&P Global