The Ethereum market has been experiencing a notable shift in recent months, with the availability of ETH on exchanges reaching a new low. This scarcity has ignited speculation about a potential price increase.
Declining Exchange Balances
According to data provided by OnchainHQ’s Head of Research, Leon Waidmann, the balance of Ethereum on exchanges has fallen below 10% for the first time. This marks a significant decrease from historical levels, indicating that fewer tokens are readily available for trading.
Since 2016, the amount of Ethereum held on exchanges has fluctuated. Initially, over 28% of the total Ethereum supply was concentrated on these platforms. However, a gradual decline began in early 2017, reaching below 15% by that year’s end. This trend continued, culminating in a substantial reduction to 9.985% by August 2024.
The decline in exchange balances coincided with the rise of Ethereum 2.0 staking, which began with the launch of the Beacon Chain in December 2020. As more Ethereum tokens were locked up in staking contracts, their availability on exchanges diminished.
Potential Price Surge
The reduced supply of Ethereum on exchanges and anticipated increased demand, have led to speculation about a potential price surge. As demand outpaces supply, upward pressure on the price may result.
While Ethereum’s price has experienced a decline from its monthly high, certain indicators suggest a possible reversal. The Relative Strength Index (RSI) is approaching oversold territory, indicating that the asset may be undervalued.
Additionally, the Moving Average Convergence Divergence (MACD) shows signs of diminishing bearish momentum, suggesting a potential shift toward a bullish trend.
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Key Support Levels and Investor Sentiment
Despite the positive outlook, Ethereum faces a crucial test at key support levels. Analysts like Ali Martinez have identified a significant support zone between $2,300 and $2,380, where investors hold many Ethereum tokens. If this support level is breached, it could lead to further price declines.
However, the current price of Ethereum above this support zone, combined with about 65.64% of holders being “in the money,” suggests that investor sentiment remains relatively strong. This may provide a degree of resilience to the market.
The declining supply of Ethereum on exchanges, positive technical indicators, and strong investor sentiment have created a favorable environment for potential price appreciation. While challenges remain, the current market dynamics suggest that Ethereum may be poised for a rebound.
Disclaimer: This content is meant to inform and should not be considered financial advice. The views expressed in this article may include the author’s personal opinions and do not represent Times Tabloid’s opinion. Readers are urged to do in-depth research before making any investment decisions. Any action taken by the reader is strictly at their own risk. Times Tabloid is not responsible for any financial losses.
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