Ethereum Price Supply & Demand Analysis and Projections

Here’s why I’m bullish on the ethereum price

Prices are driven by supply and demand. Let’s examine both:

Supply will start reducing

Ethereum’s 2.0 “merge” upgrade will make ethereum deflationary. Increasing staking yields will also attract people to hold and stake (ie. lock away) their eth, and validators under Proof of Stake will be less inclined to sell their eth rewards compared to Proof of Work miners.


Increasing network activity will increase demand for ether because ether is required to pay for gas fees. Ethereum will be used not just for buying and holding ether, but for decentralized finance, earning yield, and trading digital tokens (fungible or non-fungible). Blockchains have enormous network effects, and value increases exponentially based on Metcalfe’s law.

Ethereum will also start to become rightfully recognized as a major store of value. Currently only bitcoin seems to be considered as a store of value in the mainstream, but ethereum is superior to bitcoin due to having actual applications on top of being a store value. The 99% energy reduction from Proof of Work will only further improve ethereum’s narrative relative to bitcoin’s energy-intensive Proof of Work.

Major catalysts

The ethereum 2.0 merge is a major positive catalyst for ethereum because it makes ethereum deflationary, increases staking yields, reduces the need for “miners” to sell, and reduces energy usage by 99%.

Layer 2s becoming production ready and having parity with mainnet would be massive for usage by making transactions cheap and fast. Being able to onboard to layer 2s directly from centralized exchanges would also be extremely beneficial by eliminating the hassle and cost of needing to go through layer 1.

After layer 2s become mainstream, I think privacy will be the next major theme. I’d argue that crypto will probably never get mainstream adoption with payments until privacy is implemented, probably on a layer 2 zk rollup. I personally definitely have no interest in paying for everyday real world goods with ethereum if it means anyone can see my entire transaction history, but zero knowledge proofs will solve that (ZCash and Monero already allow this, though they don’t support smart contracts. works for ethereum, but one needs to first pay gas fees to deposit there).

What will drive Ethereum and Crypto adoption?

Being able to self-custody your money and send it anywhere in the world without KYC laws or middlemen is obviously extremely valuable.

Decentralized finance will be a huge attractor to ethereum. Currently one can make 2% in interest on stablecoins, compared to about 0.06% in savings accounts in traditional banks.

Trading of digital assets like tokens and NFTs will also be massive. It’s easy to look at the obsession with trading JPEGs of monkeys and dismiss it, but what we’re seeing right now is still the very early stages – like the internet in 1999 or Youtube in 2006.

Blockchains are basically decentralized databases, through which users can trade digital assets without any intermediary. These assets can be programmed with any kinds of rules imaginable. Although there’s obviously a lot of froth right now in the markets, it’s conceivable that in the future, any asset that can be tokenized and would benefit from tokenization will probably be tokenized, especially when the technology is cheaper, faster, and more ubiquitous.


The primary risk I see is if instead of ethereum and layer 2 rollups dominating, we see a more multi-chain ecosystem of application-specific blockchains, similar to the ethos of Cosmos and Polkadot. Personally I’m betting more on ethereum because I think network effects will make a small number of blockchains dominate, but I”d like to explore this further.

Also it’s important to acknowledge that this is all speculative. Ethereum does not have any real cash flows tied to the real world, and never will until either people start needing to use ethereum for real world activities, or if governments start mandating it as legal tender. I’m skeptical we’ll see many governments classifying ethereum as legal tender (though I see ethereum becoming a major world asset), and we’re definitely a long ways away from ethereum being used in real life. But we will get there.

Is this all just a giant Ponzi scheme?

Ponzi schemes have no utility, whereas ethereum has clear utility.

But it’s true that there are no guaranteed cash flows like owning a stock in a cash flow positive business. Much of its value is speculative. The same is true for gold, which derives at least 40% of its value from speculation. Holding fiat currency is also speculative given inflation and exchange rates.

But given the real utility here, and the fast that this technology has the potential to transform the entire financial sector and more, I think it’s a pretty good bet. But don’t invest anything you’re not willing to lose, because it’s all speculative, and anything could happen in the short-term.

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