Ethereum (ETH) has staged a strong comeback this month, helped by the ongoing risk-on sentiment in the crypto market. After 45% gains in May, ETH is now within touching distance of $3,000, a key psychological level. Adding tailwind to this price rally is smart money investors buying dips while the ETH balance on exchanges plummets.
Smart Money Buys ETH, Boost Ethereum Price Rally
On May 14, Ethereum (ETH) rose 1.73% to hit $2,700 for the first time since February 24. Currently, ETH trades at $2,600 after dropping 4.36% from the daily high. A potential catalyst that may propel ETH to $3,000 and above is accumulation from smart money investors, as spotted by Nansen. The platform tracked 1,922 smart money investors, up from last month’s low of 1,670. It is the highest figure it has been since February this year. They now hold 123,615 ETH coins, up from last month’s low of 86,709.
Ethereum Smart Money Investors buy
These investors are usually more experienced than retail traders, and their actions, such as accumulation or distribution, tend to impact the underlying asset. In most cases, they are quick to spot potential reversals, as they did in April when the price of Ethereum crashed to $1,380. As the chart above shows, they started buying on April 9 and continued doing so before it went parabolic last week.
ETH Supply on Exchanges Falling, Staking Inflows Rise
CoinGlass data shows that exchange balances have dropped from a peak of 15.75 million on April 25 to 15.15 million as of May 14. Historically, exchange outflows are usually a bullish factor as the tokens are not readily available to sell during times of panic. On the other hand, exchange inflows is bearish and shows investors are ready to exit their positions.
Ethereum Exchange Reserves
In addition to the smart money accumulation and drop in ETH held on exchanges, Ethereum staking inflows have jumped by 309K tokens, worth roughly $813 million. This massive spike in the last 30 days is a sign that investors believe in the long-term performance of Ethereum price and are staking their coins to earn interest denominated in ETH.
All three factors mentioned above provide a clear bullish tailwind that hints at a bullish price prediction for Ethereum.
Ethereum Price Analysis: 2 Scenarios to Watch
With fundamentals and on-chain metrics clearly bullish, investors need to look to technical analysis on what to expect next for the Ethereum price. Here are two scenarios that Ethereum price can produce next – a continuation of the uptrend to $3,000 or a retracement to key support zone before heading to $4,000.
ETH Extends Gains to Revisit $3,000
The daily chart shows that the value of Ethereum (ETH) has jumped, moving from a low of $1,385 in April to $2,700 today. During its ascent, ETH moved swiftly above the key resistance at $2,121, the neckline of the double-top point at $4,080. This development invalidated the view that the rebound was part of a break-and-retest pattern, a common continuation sign.
Ether is about to form a mini golden cross pattern as the spread of the 100-day and 50-day Weighted Moving Averages narrows. This suggests that the short-term momentum is clearly bullish. This move could add more fuel to the ongoing ETH price rally and potentially push it to revisit $3,000.
The Average Directional Index (ADX), which measures the strength of a trend, has jumped to 36. Therefore, the most likely ETH price forecast is where the coin jumps to $3,000 this week.
Ethereum Price Chart
While the above outlook provides an optimistic outlook, where Ethereum price continues its ascent to hit $3,000. However, a more conservative outlook involves a retracement before ETH hits $3,000 or even $4,000.
Retracement to $2,000 Before ETH Hits $4,000
From a price action perspective, the daily chart shows Ethereum has hit the short Point of Interest (POI) at $2,653 and is ready to retrace. A pullback after a near-50% rally is likely, as indicated by the Relative Strength Index (RSI) hovering in the overbought zone. A closer look at the RSI and Ethereum price shows a clear bearish divergence.
A bearish divergence is formed when price produces a higher high while the RSI produces a lower low. This non-conformity signals a lack of momentum that does not support the bullish price action and often leads to a correction. Hence, investors can expect a retracement to the next key support zone – the weekly bullish breaker, extending from $1,872 to $2,069. Investors looking to buy the dip can do so here.
A bounce from this area will have allowed bulls to recuperate the momentum and reset the RSI, potentially propelling Ethereum to revisit the first key hurdle at $3,000. A flip of this resistance level into a support floor could make way for ETH to sweep $4,093 and collect the buy-side liquidity resting above the string of equal highs formed around here.
ETH/USDT 1-day chart
To conclude, the overall outlook for Ethereum’s price remains bullish, as supported by on-chain and technical analysis. A breakdown of the weekly support zone at $1,872 will be the first sign of weakness. A decisive daily candlestick close below $1,700 will create a lower low on the daily timeframe and invalidate the bullish thesis. Such a development could see ETH revisit $1,500 or $1,385 support levels.
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