Yerevan (CoinChapter.com) — Ethereum is a mega bull sleeping until further notice.
The second-largest cryptocurrency rallied up to 179.27 percent on a year-to-date timeframe, hitting its record high at $2,041.42 (data from Coinbase). It later corrected by 36.67 percent, only to reject further bearish assaults and rebound back towards $2,000. As of now, it was wobbling between two mindsets: whether to rally above $2,000 or crash on profit-taking sentiment.
Out of Stock
But far away from classic technical patterns, one on-chain indicator shows Ethereum as one of the most bullish tokens in business. Data analytics platform CryptoQuant noted that the cryptocurrency’s reserves across all the exchanges have been declining lately, pointing to an imminent supply crisis in the Ether market.
So here’s the thing about reserves: people who want to actively trade their tokens typically keep them in the wallets of their exchange accounts. As a result, the token reserves on the said trading platforms start rising. Nevertheless, when traders show disinterest in trading the token for other assets, they withdraw it to their private wallets to ensure their safety.
Ethereum traders are doing the very same time. They have withdrawn about 6 million ETH tokens out of all the cryptocurrency exchanges. They don’t want to sell it for fiat, or exchange it for another crypto-asset—they just want to hold them in their private wallet.
As more Ethereum goes out of supply, and the demand for the cryptocurrency rises, new investors are willing to pay extra costs to accumulate it. Therefore, bids for Ethereum rise. The chart above shows that a declining ETH exchange reserve is coinciding largely with a rising ETH price. It is now at its two-year low.
Ultimately, there is less selling pressure in the Ethereum market. That said, should the demand follow, the ETH/USD exchange rate has more room to grow in the coming sessions.
“This happened to $BTC in Nov of 2020,” said Pentoshi, an independent market analyst. “Then it went from 10k to 60k Now it’s happening to $ETH at 1800 and I fear how high it can go leading into the Summer fork.”
Technical patterns expect the pair to hit $2,000, and continue rallying higher towards $5,000 by the end of this year. That is due to the Ethereum 2.0 narrative — an upgrade that would switch its protocol from energy-intensive proof-of-work to a much cheaper proof-of-stake.
Ethereum already has the busiest blockchain network, supporting everything from decentralized exchanges to stablecoins to lending platforms atop it. The market expects the growth to continue, raising demand for ETH tokens.
The only drawback is competition. Many projects want to snatch away Ethereum’s leadership in the area of smart contracts. Of late, Polkadot, Cardano, Avalanche, Binance Smart Chain, and many others have experienced dramatic price rallies against Ethereum’s higher transaction and gas fees.