Ethereum’s utility has seen an explosive rise over the past couple of years. Throughout late-2017 and most of 2018, the blockchain’s utility was primarily rooted in the ICO mania that plagued the cryptocurrency market.
This shifted in late-2018, however, as a regulatory crackdown on ICOs across the globe largely put an end to the trend.
Throughout 2019, ETH began seeing a massive influx of usership and on-chain activity due to the rapid growth of decentralized finance (DeFi).
This trend is still gaining momentum, and heightened stablecoin issuance on the Ethereum blockchain has also perpetuated it.
The fundamental strength stemming from these trends and the imminent launch of the ETH 2.0 testnet seems to suggest that the cryptocurrency could be bound to see some intense technical strength in the months ahead.
That being said, this may not be enough to stop it from reeling lower in the near-term due to what could be an imminent break below a key ascending trendline.
Ethereum’s Utility Mounts as DeFi Trend Gains Steam
There has been a clear divergence between Ethereum’s utility and its price action throughout the past year.
While the ICO mania seen in 2017 and 2018 did perpetuate an unsustainable uptrend, the subsequent utility it has garnered has been of a very different nature.
Much of this newfound utility has come from the DeFi trend, in which users can offer and receive peer-to-peer loans using their cryptocurrency as collateral.
This ecosystem is largely built upon, or premised around, Ethereum.
According to data from DeFi Pulse, there is currently a total of $1.33 billion locked within collateralized loans.
This number rocketed higher over the past few weeks and just set a fresh all-time high.
Its previous all-time high was set in mid-February, but it then plummeted as many collateralized positions were liquidated throughout the course of the capitulatory market decline seen in March.
Su Zhu, the CEO and CIO of Three Arrows Capital, spoke about the importance of DeFi in a recent tweet, explaining that it is a bullish catalyst for the crypto – despite what some people say.
“Ppl commenting that DeFi is a less explosively bullish catalyst for ETH than ICOs are forgetting the fact that DeFi is an incrementally accretive and sustainable trend while ICOs were not.”
ETH’s Fundamental Strength May Not Be Enough to Guard Against Technical Weakness
Despite flashing some signs of having intense fundamental strength, Ethereum is still in a precarious position from a technical perspective.
One analyst offered a chart showing that the cryptocurrency is currently at risk of breaking below a key trendline that has been guiding it higher over the past few months.
Image courtesy of Cold Blooded Shiller. Chart via TradingView
If the trendline is broken below, it is possible that ETH will plummet lower, providing bullish investors with good entry points.
Featured image from Shutterstock. Charts from TradingView.