Ethereum's price rises as investors anticipate the launch of spot ETH ETFs and the amount of Ether held on centralized exchanges declines. Discover the key factors driving this bullish trend.
Ethereum (ETH) is off to a promising start in the second half of the year, witnessing a roughly 2.5% increase to trade at $3,469. This upward momentum is in line with the overall positive movements across the crypto market, where the net capitalization has risen by approximately 2.3%, resting at $2.32 trillion. Let's delve into the primary factors driving this rise in Ethereum's price: the anticipated launch of spot Ethereum ETFs and bullish on-chain metrics.
Anticipated Launch of Spot Ethereum ETFs
The excitement around Ethereum’s price hike can be attributed to the upcoming launch of spot Ethereum exchange-traded funds (ETFs) in the United States. Initially expected to debut as early as July 2, the launch has faced delays from the U.S. Securities and Exchange Commission (SEC), which requested resubmissions of S-1 forms by July 8. According to Bloomberg Senior ETF Analyst Eric Balchunas, this postponement could push the ETF launch to mid-to-late July. Despite the uncertainty, there is optimism that the spot Ethereum ETFs will launch this summer.
The introduction of spot Ethereum ETFs follows the success of spot Bitcoin ETFs, which have already demonstrated significant capital inflows. Analysts at Steno Research project that spot Ethereum ETFs could attract net inflows of $15 to $20 billion in the first 12 months, potentially driving Ether's price to $6,500 by the end of 2024. In a report published on June 27, senior analyst Mads Eberhardt emphasized that even considering outflows from the Grayscale Ethereum Trust (ETHE), the net inflows should boost Ether’s value both against the dollar and Bitcoin (BTC).
Decline in Ether Holdings on Exchanges
Supporting the bullish sentiment, data from CryptoQuant reveals a notable decrease in the total amount of Ether held by centralized crypto exchanges. As of June 30, the balance had dropped to a four-year low of 16.61 million ETH, its lowest level since July 2021. This reduction in exchange holdings aligns with Ether’s price increase, indicating decreased selling pressure and a growing preference for holding ETH in private wallets or decentralized protocols.
Additionally, CryptoQuant data shows a steady rise in the total value of ETH staked on the Ethereum Beacon Chain, reaching 33.33 million ETH as of June 30. This figure is nearly double the amount held by exchanges, highlighting a strong inclination towards staking for stability and rewards, despite the option to withdraw staked ETH after the March 2023 Shanghai upgrade.
Technical Analysis and Support Zones
From a technical standpoint, Ethereum is trading above a robust support zone compared to the resistance levels it faces in its recovery. Data from IntoTheBlock indicates that the immediate support around $3,400 is within the $3,362 to $3,407 price range, where approximately 3.88 million ETH were previously acquired by about 2.83 million addresses. The ETH/USD daily chart shows that the price has been oscillating around this level since June 24, signifying its importance for both buyers and sellers.
Should the bulls maintain control above this support, they could push the price above the 50-day simple moving average (SMA) at $3,536. A critical level to monitor on the upside is the March 12 range high at $4,093. Conversely, if sellers regain momentum, the first major support lies at the 100-day SMA at $3,380, with additional defense lines at the 200-day SMA at $3,073 and the psychological $3,000 level.
Ethereum’s price surge is fueled by the anticipation of spot ETH ETFs and the decline in exchange-held Ether, reflecting a broader bullish trend in the crypto market. As regulatory approvals progress and on-chain metrics continue to show strength, Ethereum's future looks promising, with potential significant gains on the horizon. Investors and market watchers should keep a close eye on these developments as they unfold, shaping the next chapter for Ethereum and the broader cryptocurrency landscape.
(NANCY LUBALE, COINTELEGRAPH, 2024)