After peaking at $4.1k a couple of months back, Ethereum [ETH] has grappled with maintaining a consistent upward trajectory. During this period, it has encountered significant volatility, plummeting to as low as $2.1k.
These market dynamics have stirred divergent sentiments among cryptocurrency analysts, with some expressing optimism while others adopting a more pessimistic stance.
Among the optimistic voices is CryptoQuant’s analyst Mac, who remains bullish on Ethereum’s growth prospects despite its recent price fluctuations.
Key Catalysts for Ethereum’s Continued Growth
As per CryptoQuant’s analyst, Ethereum’s potential for further growth remains robust, even in the face of prevailing supply side challenges.
This growth potential is underpinned by four major factors. Firstly, Ethereum’s current realized price hovers around $2.2k, presenting a significant undervaluation compared to its price of $2.6k.
The $2.2k level acts as a robust support base, with the circulating MVRV based on the realized price signaling an undervaluation with a value above 1.
Secondly, Ethereum has witnessed a steady increase in the number of long-term holders who have accumulated ETH and refrained from selling.
While some large investors may have exited their positions, persistent holders have absorbed this selling pressure effectively.
Thirdly, Ethereum has witnessed a decline in selling pressure in the futures market, indicating a reduction in selling activity despite the price drop. This hints at a relative influx of buying interest within the market.
Lastly, institutional investors have been actively accumulating Ethereum, with major players seizing the opportunity to buy the dip during price plunges.
For instance, BlackRock acquired 100.5k ETH valued at $276 million, Cumberland bought ETH worth $174 million, and other institutions like WLFI are also joining the buying spree.
This institutional buying spree serves as a vital counterforce to downward pressure.
Therefore, despite Ethereum facing challenges in sustaining its price gains, positive demand-side factors are at play.
Insights from ETH’s Market Trends
Ethereum has notably been buoyed by optimism from the demand side.
Presently, Ethereum’s Taker buy-sell ratio has shifted into positive territory at 1.05 after being negative for the past five days. This indicates a resurgence of buying interest, outweighing selling activity.
Moreover, Ethereum’s Fund market premium has turned positive for the first time this week.
A positive FMP suggests a bullish sentiment among investors, with long positions paying shorts to retain their trades in anticipation of a market rebound.
Lastly, Ethereum’s exchange reserve has hit a yearly low, signaling active accumulation of ETH by investors. More ETH is exiting exchanges, pointing to increased storage in cold wallets.
In conclusion, despite challenges on the supply side, the demand for Ethereum remains strong. With robust demand, ETH could witness market strengthening to retake higher resistance levels.
Therefore, as the battle between supply and demand continues, Ethereum is likely to trade sideways until market conditions and macroeconomic factors align for an upward trend.