Ethereum hit another record high yesterday as traders weighed limited supply against the euphoria surrounding the launch of Ether futures on the Chicago Mercantile Exchange next week.
The second-largest cryptocurrency nearly reached $1,700 for the first time in history after nearly 11 months of rallying that saw its price rise more than 1,750 percent since last March. The gain appeared to be part of a broader bullish trend in the cryptocurrency market that has The News Spy seen many, including Bitcoin, AAVE and UniSwap, rise to their all-time highs.
Broadly speaking, market interest has risen after institutional investors began putting their capital into the bitcoin market – believing that the benchmark cryptocurrency would act as their hedge against inflation caused by the Federal Reserve’s ultra-loose policies and the US government’s expansionary stimulus programmes.
Retail investors also turned to Bitcoin as they increased their bets in the alternative cryptocurrency markets. Ethereum benefited due to its positive correlation with the top cryptocurrency. A spate of bullish fundamentals, including Ethereum’s shift from an energy-intensive proof-of-work protocol to a revenue-friendly proof-of-stake mechanism, also helped drive its prices higher.
As a result, traders are already showing signs of becoming long-term investors and expect the Ethereum price to reach US$2,000 in the coming sessions. This has been highlighted by reports of a massive outflow of Ether from all cryptocurrency exchanges.
As a result, there are now fewer tokens in active circulation, creating a liquidity crisis as demand increases.
„Ethereum is increasingly locked into DeFi (Decentralised Finance) protocols, while investors are also moving Ethereum into their own personal cold storage to hold it for the long term,“ explains Simon Peters, an analyst at online investment platform eToro, for example.
„It is clear that this diminishing supply is quickly feeding into the price. As institutions are expected to increase their positions, we expect the price of Ethereum to rise from here,“ says Peters.
Meanwhile, the CME’s decision to launch Ethereum futures next Monday is also acting as a tailwind for the cryptocurrency’s uptrend.
„The listing of Ethereum futures on a regulated exchange should serve to improve the structure of the crypto market by providing investors with exposure to the second most valuable cryptocurrency as a diversifier to Bitcoin or simply to hedge existing Ethereum exposure,“ JPMorgan analysts said in their note to clients.
Nonetheless, the bank warned of an imminent downward correction after the launch of Ethereum futures, blaming it on the tendency of physical holders to hedge their exposures.
Technical chartists see it differently. Many of them comment that ETH/USD is on track to reach $2,000 – based on fractal structures adopted from the bitcoin market.
BTC/USD has reached $42,000 almost two months after hitting its previous all-time high at $20,000.
„So far ETH is mimicking the BTC move,“ comments Scott Melker, host of the WOAS podcast Ethereum’s Price Action (Go to Buy Ethereum Guide). His conclusion:
„All-time high, consolidate for about two weeks, breakout with strength.“