As many predicted, Ethereum had a good start to the year, trading above $2,400 on the second day of January, with only minor declines disturbing its price trajectory up to that point. But what no one foretold was the decline that followed. The asset fell abruptly on January 3rd, which took the crypto community aback. Although regular drops are commonplace for all cryptocurrencies, this one stood out for being the sharpest in months for Ethereum.
According to Binance, the Ethereum price fell 6% in 24 hours, slipping under $2,200. Apart from being the highest pullback in over two months, the event also correlated with a cutback in profit supply. Fortunately, the crypto quickly recovered, finding stability in the $2,200 to $2,300 price range. At the time of writing, the Ethereum price stood at $2,261.
But even more interesting is that an increase followed the decline in Ethereum outflows, which paints a positive outlook for the crypto. Could this be the beginning of a new bull run for Ethereum? Many believe that the asset might see values as high as $3,000 if whales buy the dip, as data indicates.
New highs on the horizon
The recent drop, although short-lived, caused the Relative Strength Index (RSI) to drop under the neutral level. The RSI is a technical analysis tool that tracks recent price movements and measures their impact on a scale from 0 to 100, helping investors determine if an asset is overbought or oversold. Despite the slight price increase, the indicator remained below 50, currently hovering around 42, meaning Ethereum is neither bullish nor bearish.
On a more positive note, the Awesome Oscillator (AO), another indicator that measures market momentum, is getting close to crossing the zero line, suggesting that Ethereum is leaning toward a more bullish trend. If Ethereum passes and stabilizes above the $2,300 mark, it can carve a path to $2,400. ETH could increase to $2,500 or $2,600 in an even more optimistic scenario.
But the most important development that fuels hopes for a new bull involves Ethereum outflows. On the same day the Ethereum price fell unexpectedly, the asset registered a surprising increase in outflows. Before this date, inflows were rising, signaling that holders were transferring their assets to exchange platforms, aiming to sell them.
The situation seems to have reversed now that outflows have overtaken inflows, with over 22,000 ETH being moved out of exchanges on January 3rd. The sales volume has increased slightly since then, but the overall trend shows that holders have shown resilience amidst market volatility.
The spike in Whale Transaction Count and volume can also signify that traders and investors are buying the dip. With whales making transactions amounting to $100,000 or more, these transfers could likely cement a bullish momentum for the altcoin leader.
Moreover, according to IntoTheBlock’s Global In/Out of the Money (GIOM) indicator, the $2,300 price point shows low resistance, meaning Ethereum won’t experience any major difficulties trying to surpass it.
ETH supply in profit declines
Although most of the data we have at the moment provides reasons for optimism, we have to look at the whole picture before judging. The price slump on January 3rd is not the only negative development that Ethereum has experienced since the beginning of the year. In a ripple effect, the brief crash caused a notable decline in the percentage of profitable Ethereum supply.
Before the price fall, the profitable supply amounted to over 110 million ETH, accounting for 84% of the total supply. Immediately after the fall, the supply dropped to 107 million, or 82% of the supply. The decline continued over the following days, reaching 104 million or 79% of the total supply at the time of writing.
The circulating ETH supply in profit expresses the percentage of existing coins whose current price is higher than when they were last moved. So, although one shouldn’t read too much into the shift in profitable ETH, it’s still an indicator worth considering when analyzing the current state of the asset and its prospects for the future.
What Ethereum will do next is anyone’s guess. However, two potential scenarios seem to take shape. The first is a break above the $2,300 price point, which could propel Ethereum further up on its appreciation trajectory, possibly close to the $3K level. The second, less fortunate case could see Ethereum step back and fall under $2,100. This could spell trouble for the asset, making the bullish outlook improbable. Moreover, Ethereum could slump to the critical resistance level of $2K, which could trigger a sell-off and compromise the coin’s ability to bounce back.
Technical indicators are sending mixed signals, making it difficult for analysts to predict which way the wind will blow for Ethereum. The decision by the U.S. Securities and Exchange Commission regarding the potential approval of a spot Bitcoin ETF could impact Ethereum’s price trajectory and bring more clarification on future developments. Until then, traders and investors have to keep their fingers crossed that the second-leading asset will remain strong enough to weather any turbulence in the market.
Wrapping up
So far, 2024 has been a mixed bag for Ethereum, with an impressive initial surge followed by an equally sharp decline. However, this is just the beginning of Ethereum’s new chapter, and we have many more months ahead that could bring a flurry of interesting developments for the main altcoin and the industry as a whole.
