Ether (ETH) is currently grappling with the resistance level of $3,000 after experiencing a significant 29.7% surge from February 6th to February 20th. Analysts attribute ETH’s recent gains to a decrease in supply, driven by the growing demand for staking, decentralized finance (DeFi) applications, and the decrease in supply caused by the network’s proof-of-stake burn mechanism.
While Ether’s rally to $3,000 is impressive, the real question is whether the altcoin can gather enough strength to reclaim the sought-after $3,300 level last seen in March 2022.
Crypto investor Ryan Sean Adams suggests that Ethereum hasn’t even hit its demand season yet and speculates that the potential introduction of a spot Ether exchange-traded fund (ETF) could boost its price, especially in the absence of new supply. Data shows a decrease of 18,960 ETH in total coins circulating over the past 30 days, according to ultrasound.money. However, it’s important to note that this metric doesn’t necessarily reflect the ETH available for sale, which can be measured using net deposits on exchanges.
Looking at the seven-day trend, there has been a preference for net withdrawals since February 15th, although this could easily change, as seen in early January. Contrary to expectations, Ether’s price remained relatively steady in the 30 days leading up to January 5th at $2,300, suggesting that whatever triggered the sale wasn’t directly linked to a price rally. The dynamics of staking and demand for ETH in decentralized applications don’t seem to directly impact the supply available for sale.
Technically, the potential approval of the ETF could trigger a rally in Ether’s price, with analysts estimating approval odds between 50% and 80%. However, if Bitcoin’s bullish momentum falters, the likelihood of Ether consolidating above $3,300 diminishes, indicating that institutional investor inflow might not be enough to drive its price. Additionally, the historical correlation between BTC and ETH prices remains noteworthy.
There’s no guarantee that the historical trend will persist, particularly with the potential bullish momentum from the spot Ether ETF, but sustained decoupling between Bitcoin’s and Ether’s price has been rare in the past nine months.
Instead of focusing solely on the anticipated ETF decision in May, traders should consider other catalysts, such as the demand for ETH stemming from airdrop snapshots and the overall Ethereum network demand.
For instance, enthusiasm for upcoming Ethereum token launches decreased after the Starknet (STRK) airdrop, a highly anticipated layer-2 token, plummeted nearly 60% since February 20th. This drop was attributed to significant sell pressure from airdrop hunters and major Ethereum infrastructure firms like Nethermind. Moreover, criticism emerged regarding participants deemed ineligible for the distribution and controversies surrounding the release of 13% of the supply just two months after launch.
To gauge whether professional traders maintain a bullish stance on Ether’s price while dealing with the $3,000 support, one should analyze the price of ETH futures monthly contracts compared to regular spot markets. In neutral markets, these instruments typically trade at a premium of 5%-10% to account for their extended settlement period.
The Ether one-month futures premium has remained above 14% since February 17th, indicating continued demand for leverage longs (buys). While this metric signals bullishness, it falls short of displaying the excessive optimism seen in the 25% premium from January 2nd. The data suggests that Ether bulls need not worry about supply on exchanges or the use of leverage in futures markets, making the prospect of ETH surpassing $3,300 still plausible.
It’s important to note that this article does not provide investment advice or recommendations. Every investment and trading move carries risks, and readers should conduct their own research before making any decisions.