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Fidelity Digital Assets released a Q2 2023 Signals Report on July 18, which claimed that Ethersoutlook for the next 12 months and the long term is positive. Year-to-date, Ether (ETH)has gained 62%, but while the investment firm might be short-term bullish on Ether, that does not mean it believes that the month-long bullish channel will be sustained.

While institutional investors like Fidelity Digital Assets may have a bullish longer-term vision for ETH's price, lets compare their analysis against network and market data to see if theyre on the money.

Beyond the technical indicators, the rationale behind Fidelitys bullish outlook for Ether is the networks higher burn rate versus coin issuance, the new address momentum and a growth in the number of network validators.

According to the Fidelity report, the net issuance since the Merge in September 2022 resulted in a net supply decrease of more than 700,000 Ether. Additionally, the analysts claim that Glassnode data showing an increasing number of Ethereum addresses that transacted for the first time ever proves healthy network adoption.

The report also points to a 15% increase in the number of active Ethereum validators in the second quarter.

The expectation around EIP-1153 is also building momentum for the Ethereum network, as the transient storage opcode improves smart contract efficiency, reduces costs and amplifies the Ethereum Virtual Machine design. The change is especially meaningful for decentralized exchanges (DEXs), where Ethereums dominance declined to 46% from 60% six months prior, according to DefiLlama data.

Another potentially bullish factor for the Ethereum network is the anticipated upgrade on the leading DEX, Uniswap. According to a July 17 presentation at the Ethereum Community Conference, the upcoming Uniswap v4 will allow users to build unlimited types of pools using programmable buttons (hooks), native ETH support and a singleton contract that performs internal transactions before settling final balances.

The announcement fueled the likelihood that EIP-1153 will be included in the next Dencun upgrade, which triggered Slingshot and DeFi Pulse co-founder Scott Lewis.

If approved, the implementation will be vital for the Ethereum network to recoup the market share lost due to high gas fees, as the seven-day average transaction cost has been above $4 since February. Consequently, Ethereums total value locked has dropped to its lowest level since April 2020, at 13.55 million ETH, according to DefiLlama.

Moreover, decentralized application activity has dwindled, as shown by DappRadars unique active wallets 30-day data: Uniswap, minus 28%; 1inch Network, minus 14%; MetaMask Swap, minus 8%; and OpenSea, minus 5%. As a comparison, in the same period, BNB Smart Chains PancakeSwap gained 10%, and Polygons Uniswap users increased 8%.

Ether quarterly futures have been signaling unease among professional traders. Those fixed-month contracts typically trade at a 5% to 10% premium compared to spot markets to compensate for the delayed settlement, a situation known as contango.

According to data from Laevitas, the Ether three-month futures premium currently stands at 4%, which is below the neutral threshold and lower than the 5.5% level seen on July 14. This indicator is clear evidence that traders are less inclined to use leverage for bullish ETH positions.

More concerningly, Ethers 59% gains year-to-date might have caused investors to become overly optimistic. A recent survey from CryptoVantage of 1,000 North Americans that invested in cryptocurrencies over the past five years found that 46% named Ether as the top contender to surpass Bitcoin (BTC).

Related:Bitcoin rally will lead to "speculative blow-off top in 2024, Mark Yusko predicts

This is a somewhat startling point of view, but it could be misleading since the survey did not ask whether any coin would eventually flip Bitcoin, so respondents dont necessarily place strong odds on this outcome.

Fidelitys analysis has given valid reasons for why the firm is bullish on Ethers 12-month price performance, but in the shorter term, the recurrent high gas fees and lack of interest from leverage buyers signal increased odds of the Ether price breaking below the channel support.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts, and opinions expressed here are the authors alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.

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Crypto survey finds 47% of investors expect Ethereum to 'surpass' Bitcoin - Cointelegraph