The stock of ether (ETH) on exchanges continues to decline despite historically low levels. This trend indicates a shortage of ETH supply on major trading platforms since the release of the Ethereum 2.0 deposit wallet.
As Cointelegraph previously reported, the effort approached $ 4 billion in January, resulting in about 2% of ETH apps being banned in Eth2’s warranty contract.
The reduced supply of ETH in the stock markets should reduce the overall selling pressure on the asset, especially if the demand for ETH rises in line with the rapid growth of the decentralized financial market.
Why isn’t ETH seeing strong bullish momentum?
In terms of the amount of ETH traded in the foreign exchange market, the price of ETH did not see much gains in early February.
Analysts of network analytics platform CryptoQuant said:
“The reserve of the ETH dollar is decreasing in all the central exchanges, while the reserves of the dollar in BTC are increasing and decreasing since January of this year.”
There are two main reasons for the consolidation of ETH over the past two weeks. First, the rise in the yield on 10-year US government bonds has led to a decline in the risk market overall. Second, Bitcoin (BTC) bypassed ETH and reduced the dynamics of Ether.
But in the foreseeable future, both traders and network analysts expect ETH to double the speed again.
A trader under a pseudonym known as Cactus said that based on the technical structure of the market, ETH is ready for a new all-time high if valued at $ 1,750. he wrote:
“As long as we continue to absorb sales here and daily closings cross $ 1,750, you expect new notes to come out soon.”
Additionally, the recent drop in BTC price did not lead to a significant drop in ETH, while the ETH / BTC pair has already experienced an unexpected rebound, which means that the bullish cycle has not changed.
The next big impulse may occur when this period of consolidation and contraction is over. Mikael Van de Bobby, an analyst at Cointelegraph Markets, explained in his latest analysis that the next impulsive wave will bring Ether over $ 2,000.
In addition to shrinking foreign exchange reserves and a favorable technical market structure, CryptoQuant CEO Ki Yong Ju noted that ETH experienced its second largest hourly flow on March 16 in 2021.
An influx of money from exchanges is usually a sign of positive market sentiment, as it likely means that an institution or large investor is storing ETH and sending it to a self-service wallet. Joe Sa:
“We just got the second largest inflow out of ETH US dollars this year on an hourly basis. It looks like the liquidity crunch in central exchanges is getting worse. That’s optimistic.”
A drop in foreign exchange reserves alone may not be enough to chart a short-term bullish path for ETH due to Ethereum 2.0.
During the first weeks of launch, more than 60,000 ETH was stored on the Lido 2.0 betting platform.
Due to Lido’s efforts and deposits into Eth2 contract title, ETH has seen a sharp decline in foreign exchange reserves. However, without major catalysts, Bitcoin experienced a significant decline in its foreign exchange reserves during the same period.
Thus, it is very important that other important data points in the chain, such as increased volume of transactions and short-term additions to the end of the growth period, complement the general decline in foreign exchange reserves to bolster the case for broader growth in the short term.
Interest rates and stock market dynamics are key
In the foreseeable future, cryptocurrencies are likely to have some relationship with US government bond yields and the stock market.
Over the past month, the cryptocurrency market has seen a high reverse correlation with 10-year Treasury yields.
With the PM’s yield approaching 1.6% at the end of February, the bitcoin price slumped to a drop of $ 43,000 recently, causing Ether and other digital currencies to plummet.
As long as Treasury yields remain stable and stimulus controls are introduced in the US, Ethereum’s outlook should remain optimistic throughout March.