Ethereum Supply Squeeze: Is a New All-Time High Incoming?
Ethereum (ETH) has surged nearly 20% in the past week, decisively surpassing the $4,000 mark. Currently trading around $4,310, ETH is now just 11.7% shy of its all-time high of $4,878. But could it reach a new peak soon?
Ethereum Supply Tightens Amidst Strong Buying Pressure
A key indicator to watch during an uptrend is the level of exchange reserves—the total ETH held on centralized exchanges. Lower reserves typically indicate less selling pressure and can lead to rapid price increases when demand rises.
Ethereum's exchange reserves hit an all-time low of 18.72 million ETH on July 31 and remain near that level at 18.85 million ETH as of August 12. This suggests strong buying interest is offsetting selling pressure, driving the price higher.
Aggressive selling exists, as demonstrated by the recent sale of ETH by an early ICO participant. Despite this, the overall low exchange reserves indicate that buyers are outpacing sellers.
Derivatives Market Amplifies Potential for Upside
Adding fuel to the fire is the derivatives market. Open interest on Ethereum futures and perpetual contracts reached an all-time high of $29.17 billion on August 9 and remains elevated.
High open interest can lead to cascading price movements. If Ethereum breaks through key resistance levels, leveraged short positions may be forced to cover, triggering a short squeeze and further amplifying the upward momentum. However, significant leverage can also accelerate a downside move if bulls lose control.
Key Price Levels to Watch
From a technical analysis standpoint, Ethereum is trading within a bullish ascending triangle pattern. Key resistance lies at $4,468, the 2.618 Fibonacci extension level from its recent rally.
A decisive break above $4,468 would likely pave the way for a test of the all-time high at $4,878. If bulls clear that level, the next Fibonacci target sits near $4,893, marking a potential new record high.
Immediate support sits at $4,043. A fall below this level could trigger a deeper correction.
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