As ETH’s price rises against falling volumes, the risk of bearish exposure increases, but three critical on-chain indicators point to a different scenario.
Ether (ETH), Ethereum’s native asset, fell after reclaiming its two-month high the previous session, implying that the recent bullish rally was nearing its end.
In particular, the ETH/USD pair reached a high of $2,699 on Sunday for the first time since June 7. The pair’s peak level also pushed its relative strength index (RSI), a momentum indicator, above 70, a level considered overbought by analysts.
Traders with short-term risk setups appear to have sold the Ether top to secure interim profits, resulting in a minor downside correction.
To offset the risks of the Sunday sell-off, Ether prices rose 1.81 percent to $2,600 on Monday.
The uptick suggested that traders could still place higher bids for the cryptocurrency, particularly in the days leading up to the Ethereum London hard fork upgrade, which would bring deflationary features to the project’s economy for the first time via a new base-fee burning mechanism.
Greg Waisman, co-founder, and chief operating officer of payment network Mercuryo, believes Ether’s price could easily rise above $3,000 following the hard fork because it will bring a “more flexible and cheaper fee structure” to the Ethereum network, increasing adoption. According to the analyst:
“The hype surrounding the upcoming London hard fork is not reflective of the current price trend. […] Ethereum is currently experiencing a retracement, confirming that sellers are purposefully lowering the price in preparation for a post-upgrade price pump.”
That upbeat trio
At least three on-chain indicators that track Ether flows into and out of dedicated addresses predict an extended upside setup.
The three metrics, which were discovered on CryptoQuant, involved tracking Ether reserves across all exchanges and their outflow from trading platforms, as well as the volume of ETH tokens deposited to the Ethereum 2.0 smart contract.
According to CryptoQuant data, total Ether reserves on exchanges have decreased, indicating that fewer traders are interested in exchanging ETH for other assets. Meanwhile, ETH outflow from those exchanges increased, indicating traders’ intention to keep their Ether in reserve ahead of the London hard fork event.
In conjunction with the exchange data, the third on-chain indicator revealed an increase in ETH deposits to its smart contract.
In detail, users can stake 32 ETH into Ethereum 2.0 smart contracts to become validators on the blockchain’s proof-of-stake protocol. They can expect to be rewarded for batching transactions into a new Ethereum block or checking the work of other validators in order to keep the chain running securely.
Analysts view the event as positive because it removes active Ether supply from circulation in the face of potentially rising demand.
“The increasing Ethereum 2.0 deposits demonstrate a strong belief in the Ethereum blockchain’s future potential, which fuels the scarcity of its native token Ether,” Waisman explained. “The situation may have a positive impact on the coin’s price.”
“With these positive fundamentals, a long-term return to the previous all-time high of $4,360 will be a mildly ambitious price target for Ether.”