Ethereum (ETH) has been trading above $1,750 since May 12, while forming rising lows. Will the bulls be able to ramp up the rally to break above the critical $2,000 milestone
ETH is the native token of the Ethereum blockchain, co-founded by crypto industry heavyweight Vitalik Buterin. In the fall of 2022, the entire project migrated from the energy-consuming consensus Proof-of-Work (PoW) mechanism to the algorithm Proof-of-Stake (PoS). Next, in April 2023, the network successfully passed the update Shapella. The upgrade implemented EIP-4895, which allowed investors to withdraw their stacked ETH from the Beacon Chain.
In the course of the upgrade, the EIP-4895 offer was implemented, which allowed investors to withdraw their stacked ETH from the Beacon Chain.
In mid-April, Ethereum sank below the $2,000 mark and has been unable to recover above it since. However, onchain metrics show that investors are now making bullish moves in preparation for the next rally.
We offer a look at how the steady decline in the supply of ETH on exchanges and the trend toward accumulation among cryptokits could affect Ethereum’s price in the coming days.
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Ethereum supply on exchanges hits 5-year low
ETH investors are increasingly withdrawing their coins from exchanges. While some are opting for long-term non-custodial storage options, a significant portion are seeking the passive income opportunities that ETH now offers as a full-fledged stacking platform.
This trend appears to have intensified last week as ETH’s balance on exchanges fell to new lows.
This trend seemed to intensify last week as investor withdrawals caused ETH’s balance on exchanges to drop to new lows.
As of June 5, 2023, it stands at 17.2 million ETH, the lowest since March 2018. In the chart below, you can see that between May 22 and June 5, cryptoinvestors withdrew about 700,000 ETH from exchanges.
Ethereum (ETH) stocks on exchanges. Source: Glassnode
When investors withdraw coins from exchanges, it is commonly seen as positive for the price for several reasons. First, it reduces the number of coins available on exchanges to execute market orders.
This sharp decrease in supply on cryptocurrency exchanges often causes buyers to bid higher prices as they compete for fewer available coins.
Second, when investors transfer tokens from exchange wallets to staking smart contracts, they help protect the network and provide much-needed liquidity for blockchain projects.
The supply downturn in the market caused by such a sharp drop in exchange inventory could potentially amplify Ethereum’s next price rally.
Big whales buy back ETH from smaller whales
In addition, onchain metrics show that ETH coins being sold by smaller institutional investors appear to be flowing into the hands of the biggest investors.
The chart below shows that a cluster of whales (red line) owning between 1 million and 10 million ETH sold 500,000 coins between May 22 and June 5.
In the meantime, investors (blue line) holding between 10 million and 1 billion ETH increased their holdings by 1.62 million ETH during the same period.
Ethereum (ETH) price and whale activity. Source: Santiment
With the disproportionate financial clout of whales, their trading patterns have traditionally had a tangible impact on price movements.
The chart above shows two clusters of whale investors occupying opposite trading positions on ETH. But at the moment, the cluster with more financial power seems to be buying up all the coins for sale and more.
It is quite remarkable that the whale cluster that has taken the upper hand is currently the largest in the Ethereum ecosystem. They could affect the mood of other retail and strategic investors.
So, given the sharp decline in the supply of ETH on exchanges and the bullish activity among the cohort of the biggest players, it makes sense to expect a rise in the price in the coming weeks.
Is the path to $2,000 cleared?
But according to IntoTheBlock’s Global In/Out of Money Around Price (IOMAP) stats, the bulls on ETH will first face resistance around $1900. As a reminder, this metric tracks addresses that are approaching breakeven and reflects the distribution of hodlers along the average coin purchase price lines, thereby highlighting areas of significant resistance and support.
As you can see from the chart, there are 2.56 million addresses around $1895 that bought 3.36 million ETH at that average price. A breakout of this level would introduce the next barrier at $2050.
Ethereum (ETH) and IOMAP data. Source: IntoTheBlock
In the meantime, the bears will gain the upper hand if they break important support at $1800, which will be defended by 3.76 million investors with 3.55 million ETH bought at an average price of $1797. In that case (albeit unlikely) the decline could continue to $1700.
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