The confluence of technical and fundamental indicators suggests that ETH can remain monthly bullish despite the recent price correction.
As of June 1, ETH has fallen more than 40 percent after hitting an all-time high of $4,384 in May.
The world’s second largest cryptocurrency by market capitalization has gone downhill, leaving many analysts predicting more declines. Clem Chambers, CEO of financial analysis portal ADVFN, for example, believes the recent plunge in ETH is reminiscent of the start of the 2018 cryptocurrency collapse, which occurred before the 24,000%-plus bull run.
Comparing the bull run of ETH (black) and BTC (blue) in 2017-2018, 2020-2021. Data source: ADVFN
ETH spiked more than 4,500% after bottoming in March, then erased nearly 60% of those gains in just two weeks of trading in May. chambers noted that ETH is still at risk of falling. Adding that it could take “three and a half years” for ETH to return to its all-time highs.
FXStreet’s financial reporter Akash Girimath also noted that ETH could fall to $1,200, citing Santiment’s 365-day Market Value vs. Realized Value (MVRV) model. The index measures the profit and loss of investors who have purchased ETH in the past 12 months.
Market Value to Realized Value Ratio (MVRV) for ETH for 365 days. Data source: Santiment
Since May 11, the numbers for this indicator have dropped from 120% to 57%. The number of profitable investors with ETH portfolios is declining after the May 19 price crash. This in turn increases the likelihood that those investors who are still in profit, will sell their ETH positions in order to minimize their downside risk in the event of a prolonged price decline.
In a pessimistic scenario, arguments have also emerged in favor of an early ETH price pullback.
Major network upgrade coming in July
Investors still have a month to adjust their bias against Ether as it prepares for a major network upgrade that is expected to arrive in July.
The Ethernet Improvement Proposal 1559 (EIP-1559) update is expected to eliminate the main problem with the Ether network: higher gas fees. This will be achieved by replacing Ether’s “first price act” fee model with a base network fee based on network demand fluctuations through the upgrade.
Vitalik Buterin and Eric Conner, author of EIP-1559, expect the update to create a more efficient fee market and simplify the gas payment process for users and DApps.
At the same time, EIP-1559 proposes to burn transaction fees, thus introducing a deflationary mechanism to the ethereum ecosystem. Its impact on ETH prices could be similar to the impact of bitcoin halving on bitcoin prices, with lower supply against higher demand leading to higher prices.
Nevertheless, some believe that EIP-1559 is not as bullish for ETH as it appears. Kyle Samani, managing partner of Multicoin Capital, believes that if the price of ETH rises, the cost of using Ether will still become higher.
OKEx analyst Rick Delaney believes that caution is needed in treating EIP-1559 as a reason for ETH bullishness. He added that the proposal would make Ether attractive to wealthier investors.
“A potentially deflationary ETH, thanks to EIP-1559’s fee burn mechanism, could enhance its attractiveness in the eyes of the wealthiest investors on the planet,” Delaney said in April.” Also as part of the ongoing Ether 2.0 upgrade, the launch of a staring service appears to be helping the current rising demand.”
Dwindling amount of ETH in exchanges
Recent Glassnode data shows that ETH prices continue to flow out of exchanges even after a 40% plunge.
Data from the chart below shows that ETH reserves held by hot wallets across trading platforms fell 5.75% from 13.9 million on May 1 to 13.1 million on May 31.
The ETH balance of the exchange has an inverse relationship with the ETH price. Data source: glassnode
Persistent ETH withdrawals suggest that traders either want to hold their cryptocurrencies in anticipation of higher dollar-based returns in the future, or they want to deposit them into a decentralized financial (DeFi) liquidity pool for a stable interest rate return.
Technical Structure Breakthrough
At least two independent analysts believe that ETH prices are resuming their bullish trend based on technical indicators.
PostyXBT envisions ETH trading within an ascending triangle pattern, the first specific structure formed after the pair corrected from $4,384 to $3,590.
Generally, triangle patterns surface during bearish corrections and it may lead to a continued downward breakout move. Nevertheless, PostyXBT expects the price to remain on the support side of the triangle while targeting its resistance trend line in a bullish manner.
Technical indicators for ETH/USDT in June according to PostyXBT forecasts. Data source: TradingView
“There’s nothing to do or trade right now, I’m just watching.” The analyst, who goes by a pseudonym, added.
“In these market conditions, there is no reason to enter aggressively. The lower lows invalidate the idea.”
Another independent analyst, The Crypto Cactus, offered a similar upside outlook for ETH, except they said the cryptocurrency is in a position of support at the medium-term uptrend line, as shown in the chart below.
Projected ETH trade setups according to The Crypto Cactus. Data source: TradingView
The analyst, like PostyXBT, is careful to point out that traders can enter long positions at the current resistance trend line in ETH (near the horizontal line in the $2,500-$2,600 area).
“Avoid using leverage all together, as there is volatility in spot.” They added.
Posted by:CoinYuppie，Reprinted with attribution to:https://coinyuppie.com/3-potential-bullish-catalysts-for-ethers-june-price/
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