Thanks to technical and basic support, ETH has the potential to double its value in the coming months.
The price of ETH rose more than 9% on October 1, hitting nearly $ 3,300 for the first time in 10 days. The move up mainly came after all of the top cryptocurrencies rebounded, including Bitcoin, which rose 9.5% to hit a 10-day high of $ 48,000.
ETH 4-Hour Price Chart | Source: Tradingview
BILLIONETH-Bitcoin correlation with rising US inflation
The October 1 explosion in the cryptocurrency market coincided with the release of the U.S. Department of Commerce report on consumer spending.
data shows The US consumer price index (CPI), the Federal Reserve’s measure of inflation, rose 0.3 percent in August and 3.6 percent year-over-year. This took core inflation to a 30-year high.
Speculators tend to see Bitcoin as a hedge against inflation. This explains the leading cryptocurrency’s recent response to higher consumer prices in the United States.
Meanwhile, the average 30-day correlation of ETH with BTC is close to 0.89, according to data from CryptoWatch, which means that ETH is getting close to its big brother.
BTC price chart and ETH daily newspaper | Source: TradingView
One opinion poll from the University of Michigan, conducted August 25 through September 27, shows US consumers expect long-term inflation to rise to 3%, its highest level in a decade.
This comment seems to contradict Fed chief Jerome Powell’s view. He described rising inflation as “temporary” for months, but admitted during a recent Senate hearing that higher consumer prices could last at least until next year.
As a result, inflationary pressures have given crypto bulls a reason to consider Bitcoin as a last resort, with MicroStrategy CEO Michael Saylor suggest Companies are converting their cash-based treasury to BTC.
MicroStrategy holds approximately 0.5% of the total circulating bitcoin supply, which is currently valued at over $ 6 billion.
The London hard fork upgrade of the Ethereum network took place successfully on August 5th, further improving the bullish outlook for ETH due to the classic law of supply and demand.
The upgrade introduces the improved EIP-1559 protocol, which is starting to burn off some of the network charges known as base charges. So far, EIP-1559 has permanently removed 410,404 ETH (about $ 1.32 billion) from its active offering, according to Watch the Burn.
Ethereum is also preparing to switch the consensus mechanism from PoW to PoS. As a result, the protocol introduced a staking pool that allows users to earn rewards and increase their ETH holdings if they tie 32 ETH to the official PoS smart contract within a certain period of time.
So far, the ETH amount deposited in the Ethereum 2.0 staking contract has increased from around 11,500 in November 2020 to 7.82 million ETH today. As such, the transition has temporarily effectively withdrawn 7.82 million ETH from circulation.
Entire ETH involved in the Ethereum 2.0 smart contract | Source: CryptoQuant
On the other hand, the total amount of ETH held on all exchanges fell to a record low. Data from CryptoQuant shows exchanges currently hold just 18.1 million, compared to 23.73 million ETH a year ago.
Reserve ETH on all exchanges | Source: CryptoQuant
A decline in ETH reserves suggests that traders would rather sell HODL coins than sell them for other assets, as there could be a supply bottleneck for investors who want to participate in the ETH market, making ETH more valuable power.
Lark Davis was tweets:
“With EIP 1559, ETH supply is expected to peak around 120 million and then decrease as demand increases. That pretty sure means that prices will go up. “
Cup and handle model
The combination of lower supply and higher demand acts as bullish support for ETH. Meanwhile, the cup-and-grip pattern on ETH’s longer time frame chart provides further evidence of a bullish breakout.
The cup and handle are a bullish continuation pattern that includes a round bottom and descending channel structure, as shown in the graphic below. The profit target of the structure is usually equal to the maximum height of the cup.
Daily ETH price chart with Cup and handle model | Source: TradingView
Given the cup resistance near $ 4,000, a breakout from there could bring ETH to over $ 6,000, almost double the current price.
Join Bitcoin Magazine Telegram to keep track of news and comment on this article: https://t.me/coincunews
According to Cointelegraph