3 reasons analysts say Ethereum may replicate Bitcoin's 2016 bull run

Several prominent analysts say Ether (ETH) is on the cusp of a major bull run despite already gaining nearly 65% in 2021. Ethereum has seen explosive growth in decentralized finance and other areas, causing user activity on the blockchain to surge.

Raoul Pal, CEO of Real Vision Group, pinpointed the technical structure of ETH's price. He emphasized that the structure is strikingly similar to Bitcoin (BTC) in 2016, which means a prolonged bull rally could emerge.

The combination of Metcalfe’s law, a strong technical structure and rising user activity could fuel ETH’s momentum throughout the ongoing rally.

Pal: It's all about Metcalfe’s law

According to Pal, the price of ETH is the same as BTC in 2017, with the same market cap. If ETH follows the same trajectory as Bitcoin, it could see a significant rally in the long term.

Whether this will happen or not remains uncertain, but Pal emphasized the strong similarity between the two. He said:

“Again, if you didn’t read the charts, ETH is the EXACT same price as BTC in 2017. TheY have/had EXACT same market cap too. They look EXACTLY the same in price structure... BTC from 2016 versus ETH from 2020. It’s bizarre and it’s all Metcalfe’s Law.”

Pal explained that the similarity likely comes from Metcalfe’s law, which states that the “effect of a telecommunications network is proportional to the square of the number of connected users of the system.”

Like Bitcoin in its early days, Ethereum has seen an exponential growth of active users, primarily due to DeFi.

In January, for the first time in history, the total value locked in DeFi reached $20 billion. This means that there is $20 billion worth of capital deployed into various DeFi protocols.

The rapid growth of the Ethereum ecosystem is mostly attributable to DeFi. In mid-2020, the total value locked in DeFi was hovering below $1 billion. The figure has increased 20-fold since, with DeFi continuing to attract more users and capital.

A pseudonymous analyst known as “DCinvestor” echoed the sentiment of Pal. He explained that no one in early 2017 thought BTC would achieve $20,000. He said:

“No one thought BTC could get to $20K in early 2017, either. Of course, the market doesn't care what people think. It's all supply, demand, and reflexivity. From all indications, everything is getting scaled up this cycle. We had very few funds / billionaires involved in '17.”

What happens next to ETH?

In the foreseeable future, the seamless transition to Eth2 is important to ensure that the DeFi ecosystem continues to prosper.

In recent weeks, the Ethereum blockchain network has become increasingly clogged due to the rising use of DeFi and accompanying transaction fees.

As Cointelegraph previously reported, ETH has already become a top 100 asset by market capitalization. ETH is still around 20% away from reaching its record high, and as such, analysts say it has room for additional upside during this bull cycle.