Ethereum’s Potential for Growth Despite Price Volatility
- Ethereum’s demand side remains strong, signaling potential for further growth.
- ETH has dropped by 2.61% over the past 24 hours.
Since hitting a peak of $4.1k two months ago, Ethereum [ETH] has been struggling to maintain an upward momentum. The cryptocurrency has faced extreme volatility, dipping as low as $2.1k during this period.
These turbulent market conditions have sparked varied sentiments among crypto analysts, with some expressing optimism while others remain highly pessimistic.
One of the analysts who remains bullish on Ethereum’s potential for growth is CryptoQuant’s analyst Mac, who believes that despite the challenges, Ethereum has significant room for upward movement.
Factors Supporting Ethereum’s Growth
According to the CryptoQuant analyst, there are several key factors that indicate Ethereum’s potential for growth despite the prevailing negative supply side dynamics.
Firstly, Ethereum’s current realized price stands around $2.2k, which is considered undervalued compared to its current price of $2.6k. This undervaluation suggests a strong support level, with the circulating MVRV based on the realized price indicating that ETH is highly undervalued.
Secondly, the number of permanent holders of Ethereum who have accumulated the cryptocurrency and refrained from selling has been steadily increasing. These long-term holders have absorbed selling pressure from whales who may have exited their positions.
Thirdly, the selling pressure in Ethereum’s futures market has been decreasing, indicating a reduction in selling pressure despite price declines, hinting at a potential influx of buying power.
Lastly, institutional investors have been actively accumulating Ethereum, with entities like BlackRock purchasing significant amounts of ETH during price dips. This institutional buying pressure has acted as a counterbalance to downward pressure on the price.
Despite the challenges in sustaining gains, these positive demand-side factors indicate a strong potential for Ethereum’s growth.
Chart Analysis
Ethereum’s charts also reflect positive sentiment from the demand side.
At the time of writing, Ethereum’s Taker buy-sell ratio has turned positive to reach 1.05 after being negative for the past five days, signaling a resurgence of buyer interest in the market.
Additionally, Ethereum’s Fund market premium has turned positive for the first time in the week, indicating bullish investor sentiment and a preference for long positions in anticipation of a market rebound.
Furthermore, Ethereum’s exchange reserve is at a yearly low, suggesting active accumulation of ETH by investors and a trend of moving assets off exchanges into cold storage.
In conclusion, while Ethereum faces challenges on the supply side, strong demand indicators point towards potential growth in the future. With a high level of demand, Ethereum could see market strengthening to reclaim higher resistance levels.
Therefore, as supply and demand dynamics continue to influence price action, Ethereum is likely to trade sideways until market conditions and macroeconomic factors align for a sustained uptrend.
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