Ethereum Whales Enter the Market, Pushing ETH Price to New Highs: Rate Cut Expectations, Supply Reduction and Technical AnalysisEthereum (ETH) price surged by approximately 4.5% in the past 24 hours, hitting $3,500 on March 25th
Ethereum Whales Enter the Market, Pushing ETH Price to New Highs: Rate Cut Expectations, Supply Reduction and Technical Analysis
Ethereum (ETH) price surged by approximately 4.5% in the past 24 hours, hitting $3,500 on March 25th. This surge is part of a broader recovery trend, with ETH price increasing by about 14.5% since its March 20th low of $3,050. This article delves into the factors driving the recent Ethereum price rally, including the return of Ethereum whales, dwindling supply reflected by on-chain metrics, and shifting market sentiment driven by US rate cut expectations.
The Resurgence of Ethereum Whales
The recent rise in Ethereum price aligns with accumulation behavior among Ethereum's largest holders, known as whales. Data resources indicate that entities holding 1,000 to 10,000 ETH have increased their ETH reserves by roughly 1.15% in March. Such accumulation patterns often precede significant price surges.
Ethereum Whale Net Position Change (1K-10K ETH)
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When compared to past price movements, we can observe:
- These accumulation phases often overlap with periods of price decline, indicating that large investors are buying the dip and anticipate a price rebound.
- Whale accumulation acts as a precursor to renewed market sentiment, providing a solid foundation for price appreciation.
Decreasing Ethereum Supply
The current surge in Ethereum price is closely tied to two key on-chain metrics indicating a reduction in ETH's circulating supply.
- The proportion of Ethereum supply locked in smart contracts has surged to 36.47%, reaching its highest level as of March 5th. This lock-up reduces the circulating supply available for trading, potentially exerting upward pressure on prices.
Ethereum Percentage of Supply Held in Smart Contracts
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- The net change in Ethereum supply in the past week, as of March 25th, was approximately -4,000 ETH, highlighting a genuine decrease in circulating supply over the past week, further supporting the price rally.
Ethereum Net Supply Change in 7 Days
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- Ethereum's recovery since March 20th aligns with declining ETH reserves across all cryptocurrency exchanges. This trend indicates that traders are increasingly inclined to hold ETH, choosing to hodl rather than exchanging it for other assets.
Ethereum Balance on All Exchanges
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Rate Cut Expectations
The sustained rise in Ethereum price reflects a similar rebound trend across the broader cryptocurrency market. Hints that the Federal Reserve and its major global counterparts might initiate interest rate cuts in June have fueled market optimism.
- The probability of target rates in June being lower than the current 525-550 basis point range would generally decrease the yield (or return) on government bonds. Investors view government bonds as one of the safest investments, so reduced yields would diminish their appeal.
- This would incentivize investors to shift capital towards riskier assets, such as stocks and cryptocurrencies, thereby driving an overall uptick in the crypto market.
- The Fed hasn't raised rates since July 2023. Since then, Ethereum price has risen by over 108%, while the overall cryptocurrency market valuation gained over 114% in the same period.
- Approvals for US spot Bitcoin exchange-traded funds (ETFs) are also contributing to the bullish sentiment as the overall crypto market sentiment improves.
Weekly TOTAL Crypto Market Performance Chart
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Technical Analysis: ETH Price Rebound
- Ethereum's price began rebounding after reaching a confluence of support, comprising the 50-day exponential moving average (50-day EMA, red wave in the chart below) around $3,270 and the 0.382 Fibonacci retracement level at roughly $3,125.
ETH/USD Daily Price Chart
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- As ETH rebounds, its relative strength index (RSI) is hovering around 50, indicating that market sentiment is balanced or neutral.
- This trend resembles ETH's rebound in January 2024 (red bar), which preceded a 90% price increase to around $4,085.
- If ETH price decisively closes above the 0.236 Fib level around $3,500, ETH could break through $4,000 in April.
- Failure to achieve this target poses a risk of a pullback to the support confluence.
Conclusion
The recent surge in Ethereum price is attributed to a confluence of factors, including the return of Ethereum whales, dwindling supply evidenced by on-chain metrics, and shifting market sentiment driven by US rate cut expectations. Technical analysis suggests that ETH price has the potential for further upside, but it remains essential to monitor the breakouts of key support and resistance levels.
Disclaimer: This article does not constitute investment advice or a recommendation!
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