Ethereum is still down over 44% from its all-time highs, but it has also pumped almost 31% from its lowest point since the peak. So are we still in a bull market and can Ethereum reach another all-time high?
- Ethereum has been flowing out of exchanges at a significant rate over the last year.
- Cryptos flowing out of exchanges typically represents a purchase that has just occurred and the removal of the crypto to a personal wallet.
- Over 1.4 million Ether has left exchanges in the last 30 days.
- Long positions for Ether far outweigh the short positions, making up over 75.8% of positions.
- An upgrade to Ethereum, known as Ethereum 2.0 or Eth 2.0, promises faster and cheaper transactions which would help to open up the network to a broader range of people.
- More people using the network could result in a boosted price.
- Some have argued that Ethereum is on the same trajectory as Bitcoin and that it could reach as much as $20,000 in this cycle should the bull market continue.
- All cryptocurrencies are still directly correlated with Bitcoin and largely dependent on Bitcoin's performance.
One indicator of Ethereum's overall health is the direction in which supply is heading. Generally speaking, when cryptos are sent to an exchange it is for the purpose of selling the asset. When the opposite occurs, and crypto is removed from an exchange and sent to another wallet, it is likely due to a recent purchase.
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According to Viewbase, a site that tracks exchange flow data across the top 43 exchanges, the supply of Ethereum on exchanges has been dwindling in the last year by a great deal.
Considering the recent run-up prior to the selloff in April, the decreasing supply on exchanges over the last year isn't too surprising. But over the last month, the supply of Ether on exchanges has dropped too. Well over 1.4 million Eth has been removed in the last 30 days.
Long & Short Positions
Another factor related to exchanges is the long positions vs. short positions. There are currently far larger long positions on Eth than there are short positions.
In the last 24 hours, there is 327,238 Eth in long positions vs. 104,197 Eth in short positions on the Bitfinex exchange. In other words, the long positions in the last 24 hours are worth around $757,657,413 million while short positions are worth approximately $241,248,356 million. Long positions represent 75.8% of ethereum trades on the Bitfinex exchange.
Ethereum 2.0 Upgrade
The long positions on exchanges and the fact that far more Ethereum is leaving exchanges than is being sent to them are good signs for a continued bull market.
But an even better indicator for Ethereum's near to long-term performance is its pending upgrade that will likely boost its use and potentially its price too.
Ethereum is set to go through a massive change within the next six months to two years when it changes from the proof-of-work (PoW) to the proof-of-stake (PoS) consensus model and implements sharding.
This model, along with the use of sharding, will allow for far faster and far cheaper transactions. This is hugely important as Ethereum transactions are currently too expensive for small payments and transactions to be made.
Transaction fees on the Ethereum network have sometimes been upwards of $70. The current fee to send a coin on the network is under $10, but that means that any coins held in a wallet that has a dollar value of less than the fee cannot be moved without buying more Ether to fund the transaction.
This makes microtransactions and using Ethereum as something similar to an app like Venmo or Zelle unrealistic. The future upgrade will slowly drop transaction fees and open up the platform to all types of individuals rather than just wealthier traders or people seeking to yield farm. This increased usage from a broader range of people could result in an increased price.
Where Can Ethereum’s Price Go?
Raoul Pal, a Goldman Sachs alum and founder of Real Vision, argued that Ethereum can go as high as Bitcoin's previous all-time high of $20,000 in this cycle alone.
This was factored by looking at Ethereum's network growth and market capitalization compared to Bitcoin's. So far, Ethereum has grown at a faster rate, reaching a nearly $100 billion market cap with far fewer addresses.
Ethereum from 2017 till just before April's crash also shares almost exact prices as Bitcoin does in its lifespan from 2013 to May 2019.
Another factor is that almost all other cryptocurrencies follow in Bitcoin's footsteps. This is largely due to the fact that most people have yet to grasp these technologies and therefore lump all cryptocurrencies together.
This causes all other cryptos to move in the direction of Bitcoin as it is the most well-known. Until more people are educated on the various types of cryptocurrencies, their price movements will likely follow Bitcoin's. This makes a bet on almost any crypto really just a bet on Bitcoin's performance until these assets become uncorrelated.
With Bitcoin's recent uptrend and similar data in exchange flows (- 1.49 million BTC in the last month) and long and short positions (96.8% long on Bitfinex), the crypto market looks healthy. Should Bitcoin continue its pump other cryptos, especially Ethereum, look ready to continue their bull market as well.