Ethereum Price Data Signals Potential Rally Above $3.4K

Ether (ETH) investors experienced a rollercoaster ride in the first week of July, with the price plummeting by 18% to $2,826 before partially recovering to $3,100. This sharp decline left many traders disappointed, especially as $313 million in leveraged long positions were liquidated during this period. Despite the current price still being below the previous support level of $3,400, Ether traders are slowly regaining their confidence, buoyed by positive onchain and derivatives metrics.

One key factor contributing to the optimism surrounding Ether is the decreasing supply of the cryptocurrency on exchanges. Onchain analyst Leon Waidmann highlighted that 40% of Ether’s supply is locked in staking and decentralized applications (DApps), leading to a reduction in the amount available for immediate trading. Data from Glassnode showed that deposits on exchanges dropped from 13.34 million ETH to 12.21 million ETH over the past two months, indicating that investors are less likely to sell in the short term.

Furthermore, the Ethereum network’s total value locked (TVL) remains steady at 17.7 million ETH, demonstrating resilience in the face of high transaction fees. Despite Ethereum’s average transaction fees exceeding $2, significantly higher than competitors like Solana and BNB Chain, the network continues to attract users seeking lower fees through its layer-2 solutions.

In terms of DApp activity, Ethereum recorded a volume of $200.9 billion over the past 30 days, with significant growth seen in its layer-2 ecosystem. Platforms like Arbitrum, Blast, and Base experienced substantial increases in volumes, outperforming direct competitors like BNB Chain and Solana. This growth in activity on layer-2 solutions bodes well for the future of Ethereum and its potential price rebound.

On the derivatives front, Ether options data indicated a bullish sentiment, with demand for call options outweighing put options. The put-to-call volume ratio favored call options by 85%, suggesting that traders are more inclined towards bullish strategies using ETH options. This sentiment, combined with the reduction in ETH available for trading on fiat exchanges, supports the possibility of a short-term price rise above the $3,400 resistance level.

While the launch of a spot Ethereum exchange-traded fund (ETF) in the United States may take longer than expected, strong fundamentals and positive market indicators point towards a potential rally in Ether’s price. With analysts predicting significant inflows into spot Ethereum ETFs and a growing interest in ETH price, traders are cautiously optimistic about the cryptocurrency’s future prospects. As always, investors are advised to conduct their own research and exercise caution when making investment decisions in the volatile cryptocurrency market.