Ethereum Price Rally: Is the Bull Run Ending Amid Surging ETH Supply?

The performance of Ethereum’s price has been lackluster following the approval of ETFs in July. Despite expectations of a significant surge to an all-time high, the overall market sentiment turned bearish, leading to a decline in Ether’s value. The crypto asset landscape remains uncertain, with investors eagerly awaiting potential interest rate cuts by the Federal Reserve, speculated to be at least 25 basis points.

The sluggish movement in Ethereum’s price can be linked to a notable decrease in network gas fees, as highlighted in a recent report by Kaiko. The drop in gas fees to a five-year low was primarily driven by increased activity in layer 2 protocols and the Dencun upgrade implemented in March. While lower transaction costs benefit users of the network, it has implications for Ethereum as an asset, resulting in a reduced burning of ETH and consequently an increase in the token’s overall supply over time. Data from Kaiko indicates a consistent rise in ETH’s total supply since April, despite developments such as the approval of spot ETFs. It is important to note that a surge in demand could potentially dampen short-term momentum in ETH’s price.

Looking ahead, macroeconomic factors are poised to influence Ethereum’s price prediction in 2024, particularly in light of recent sell-offs and the challenges in recovering losses incurred over the past two weeks. The upcoming FOMC meeting minutes scheduled for August 24 are expected to provide insights into the policy outlook and the anticipated vote on the Fed interest rates cut in September.

Federal Reserve Chair Jerome Powell is set to speak at the Jackson Hole Symposium organized by the Kansas City Fed on August 21. This annual event brings together economic experts and academics to discuss key economic policies. Powell’s speech is highly anticipated as it will focus on the US economic outlook amidst concerns of a looming recession and calls for rate cuts.

In terms of price analysis, Ethereum’s price currently maintains support above $2,600 while trading within the range limits of $2,500 and $2,800. Despite these levels, downside risks persist, potentially extending the downward trend towards $2,400 to gather more liquidity. The formation of a death cross pattern, where the 20-day EMA crosses below the 200-day EMA, underscores the prevailing bearish sentiment. Additionally, Ethereum remains below critical moving averages, including the 200-day EMA, reinforcing the bearish trend.

For traders, maintaining long positions is advised as long as the Moving Average Convergence Divergence (MACD) signal remains bullish. Increasing exposure to Ethereum’s price may be considered if the MACD approaches the neutral zone, signaling a potential shift towards a bullish phase. A rebound above $2,800 and $3,000 could indicate a broader rally towards $4,000 and possibly reaching the all-time high.