Ethereum looks bullish despite the recent rally halt; 3 reasons why

Ethereum ETH
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  • Ethereum’s 50% rally came to a slight halt, but a crypto analyst gives 3 reasons in favour of a bullish outcome
  • Growing number of deposit contracts
  • Outflow from spot trading
  • Scarce reserves in exchanges

Yerevan (CoinChapter.com) – Ethereum (ETH) enjoyed a wonderful week, with an explosive 50 percent rally. The ETH/USD exchange rate stood at $2,598 in the London session Monday, culminating at $2,699 on Sunday and registering a 6-week-high. However, the rally halted slightly on August 2, with the price consolidating for hours rather than continuing the uptrend.

Crypto VizArt, an analytical account on CryptoQuant, offered their take on the current situation. The analyst claimed that the upcoming sessions still look bullish for the leading smart contract platform for three main reasons.

#1 Growing number of deposit contracts

In hindsight, Ethereum is on the verge of a significant update (London hard fork scheduled for Aug 5) that will take the platform from proof-of-work (PoW) to proof-of-stake (PoS) consensus. The latter requires validators (accounts willing to stake at most minuscule 32 ETH to validate transactions on the blockchain). Sources report at least 202,000 validators as of the moment.

The deposit contract is where users need to send their ETH to become validators. In return, they are looking at around 23 percent reward rates.

Growing number of ETH deposit contracts. Source: CryptoVizArt on CryptoQuant.com
The growing number of ETH deposit contracts. Source: CryptoVizArt on CryptoQuant.com

The growing number of deposit contracts indicates the willingness of Ethereum holders to continue their affiliation with the crypto and stake their coins despite the risk.

Also read: Ethereum reclaims $2.4K in days leading up to London hard fork

#2 Outflow of ETH from spot exchanges

In hindsight, spot exchanges are designed for users who wish to trade their digital assets for other cryptos or fiat currencies. Much like the explanation above, the outflow of ETH from the spot exchanges indicates the willingness of Ethereum investors to hold on to their coins instead of exchanging them.

The growing trust in the asset might result in bullish price action.

Outflow from spot exchanges. Source: CryptoVizArt on CryptoQuant.com
Outflow from spot exchanges. Source: CryptoVizArt on CryptoQuant.com

Also read: 4 reasons why Ethereum prices surged 210% in H1/2021

#3 Declining reserves on exchanges

The declining coins in exchanges mean fewer assets for margin trading and a scarce supply for buyers. The scarcity creates a higher value, which leads to a price increase.

Coin supply in exchanges declining. Source:
Coin supply in exchanges declining. Source: CryptoVizArt on CryptoQuant.com

With the reasons listed above, the analyst illustrated that Ethereum is on the verge of even higher gains. The daily chart agrees, with steady green candles, despite the brief consolidation on August 2, which is more visible on the four-hour chart.

Ethereum four-hour chart. Source: ETHUSD on TradingView.com
Ethereum four-hour chart. Source: ETHUSD on TradingView.com

Also read: Mila Kunis’s stoner cats stone the crap out of Ethereum gas prices.

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