Three explanations for why the price of Ethereum (ETH) can reach $4K soon

Written by Rock Buivy

Post Date: 7 Mar, 24

Even though Bitcoin sold off around $69,000, ETH is still rising, and bulls seem to be aiming for the $4,000 mark.

On March 5, ether surged 8% on the previous day to reach a new high for the year of $3,822.

The market capitalization of the second-largest cryptocurrency has increased by 132% over the past six months and by 15% over the last seven days.

TradingView data indicates that the price of ether was approximately $28% off its peak of $4,891, which was reached on November 26, 2021, at $3,796.

The surge in ETH is accompanied by a 68% increase in daily trading volume, which is currently $33.29 billion.

Ether solidifies its place as the second most valuable cryptocurrency, according to CoinMarketCap, with a market valuation of $453 billion.

Ethereum’s ascent is supported by on-chain measures and other fundamental considerations, in addition to the general upsurge in the cryptocurrency market, which is being driven by higher inflows into spot Bitcoin ETFs and the impending half of the Bitcoin supply.

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Cutting back on exchange supplies

The decrease in Ether’s supply on exchanges is one element boosting its value. After falling 7.7% over the previous ninety days, the amount of Ethereum on exchanges hit a 20-month low of 13.14 million ETH, according to data from on-chain market analytics business Glassnode.

The overall balance of all known exchange wallets’ inflows and outflows reveals a sharp decrease from October 2023, when withdrawals from trading platforms started to increase.

The price of Ether increased by 130% during the same timeframe as this decline.

The simple explanation for declining ETH balances on exchanges is that holders may be removing their tokens into self-custody wallets, signalling that they do not intend to sell in the hopes of future price increases.

This can be explained by the significant holders’ recent rise in accumulation. Since the beginning of February, the number of wallets holding $100,000 or more worth of ETH has increased, according to additional Glassnode data.

Wallets containing $100,000 or more climbed from 94,620 on January 1 to 141, 406 on March 4 (see the top chart).

This suggests that whales seek to position themselves for further gains, as evidenced by the fact that they have not sold during the most recent ETH spike and have instead continued to stockpile.

The number of Ethereum staking users is increasing

The growing amount of Ether pledged on the Beacon Chain is another factor contributing to the decline in ETH tokens accessible for trading.

Over $31.58 million ETH, or $119.8 billion at today’s exchange rates, are reportedly being staked on Ethereum’s proof-of-stake layer protocol, according to data from Dune Analytics.

This indicates that approximately 987,000 unique validators have contributed to the 26.3% of ETH supplies that have been staked and made unavailable to the market.

“The growing amount of Ether pledged on the Beacon Chain is tightening the liquidity of ETH tokens available for trading. With over $31.58 million ETH staked on Ethereum’s proof-of-stake protocol, nearly 987,000 validators are contributing to the 26.3% of ETH supply that’s now inaccessible to the market. Liquid staking platforms like Lido, Rocket Pool, and EtherFi are simplifying staking on Ethereum, allowing users to stake smaller amounts and use staked assets in DeFi, further fueling the expansion of Ethereum’s liquidity ecosystem.”

Liquid staking alternatives, such as Lido, Rocket Pool, and EtherFi, which permit staking of quantities less than 32 ETH and the use of staked assets as collateral in DeFi, have made staking on Ethereum more easier.

The total value locked on EtherFi has surpassed $2 billion, according to statistics from BlockBeats, demonstrating the expanding acceptance and appeal of Ethereum liquidity protocols.

The open interest for Ethereum approaches the 2021 peak

Ether futures OI broke above $8 billion on February 12 after being stuck below this level for more than two years, according to data from Coinglass.

From then, in less than two weeks, the OI surged by almost 50%, indicating a rise in demand for leveraged ETH positions.

The current state of Ethereum’s derivatives and on-chain markets reflects investors’ hope and expectation that a spot Ether ETF will be approved.

The price of ETH may be benefiting from some bullish tailwinds from the impending Dencun upgrade.

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