Key Points
- Ethereum’s exchange supply has reached its lowest point since 2016, indicating a potential price surge.
- Despite the decrease in supply, weak demand from U.S. and Korean investors could hinder Ethereum’s growth.
Ethereum’s [ETH] supply on exchanges has dropped to a record low, unseen since 2016. This drop suggests a liquidity squeeze that could potentially lead to a bullish outlook in the medium term.
Easing Sell-Side Pressure and Rising Accumulation
With the easing of sell-side pressure and an increase in accumulation, there’s a possibility that ETH could reclaim the significant $3.5K resistance soon.
Ethereum remains 32% below its post-election peak of $4,016, despite showing no signs of overheating. It has formed four consecutive lower lows. However, the RSI has bottomed out, and a bullish MACD crossover is shaping up, indicating that ETH’s consolidation could be building momentum for a breakout.
Potential for a Supply Shock
Historical patterns suggest caution as previous recoveries have failed to breach key resistance due to the struggle to absorb sell pressure. Nevertheless, Ethereum’s spot exchange supply has dropped to a 9-year low of 8.2 million ETH. These conditions, coupled with tightening liquidity and potential demand acceleration, could lead to a supply shock that might fuel a breakout past key resistance levels.
Ethereum faces a critical resistance at $2,785. If it surpasses this, 8.10 million addresses would turn profitable, exposing $20 billion to potential sell pressure. While spot reserves have hit a 9-month low, signaling accumulation, investors unloaded over 2 million ETH into exchanges in February, raising concerns about increasing sell pressure.
Weak demand from U.S. and Korean investors could potentially hinder Ethereum’s upside momentum, possibly trapping leveraged longs in the futures market. If demand does not recover, Ethereum might face a pullback toward $2,264, where 62.38 million ETH is concentrated.
