Ethereum (ETH) Supply Squeeze: Is Price Discovery Next?
Key Developments for Ethereum (ETH)
Ethereum (ETH) is exhibiting signs of a potential price surge, fueled by increasing institutional investment. Approximately 8% of the total ETH supply is now held in ETFs and corporate reserves, signaling a shift from a purely tradeable asset to a strategic holding.
Ethereum is potentially entering a phase of price discovery, supported by readily available exit liquidity. Historically, profit-taking would induce fear, kill momentum, and shift market sentiment to risk-off, but recent trends suggest a change.
Past ETH price peaks correlated with sharp increases in realized profits. Typically, surges in profit-taking lead to increased sell pressure, often overwhelming long-term holders and triggering market capitulation.
Recent Market Behavior
A recent surge in realized profits saw traders taking approximately $1.7 billion in ETH profits at $4,590. This event tested the absorption capacity of long-term holders and large investors (whales). The market's response was notable: ETH rallied by 2.58% intraday, surpassing two key resistance levels within 48 hours. The sell-side pressure was effectively absorbed, indicating that strong hands remain in control and are limiting the available exit flow.
Supply Dynamics and Volatility
Volatility, typically a risk factor in trading, may now be a bullish indicator for Ethereum. Price swings and exit liquidity seem to be creating structural advantages.
The 370,000 ETH realized at $4,590 demonstrated this dynamic, testing absorption capacity and reinforcing the control of long-term holders. Data from the Strategic ETH Reserve (SER) highlights continuous ETH accumulation by SER and ETF entities, collectively holding 8.2% of the total supply.
Implications of Tight Supply
- Reduced Supply: Strong holders are accumulating ETH, effectively tightening the available supply.
- Volatility Shift: This accumulation transforms volatility from a risk into a structural advantage for Ethereum.
- FOMO and Momentum: ETH is holding steady, maintaining positive momentum, which potentially paves the way for more predictable price discovery than in previous market cycles.