3 Key Factors That Could Drive Ethereum (ETH) Price to $4K in the Short-Term

Ether (ETH) Surges to New Year-to-Date High of $3,822 in Web 3.0 Era

On March 5, Ether (ETH) reached a new year-to-date peak of $3,822, marking an 8% surge in the past 24 hours. The second largest cryptocurrency by market capitalization has seen a 15% increase in the last seven days and an impressive 132% growth in the past six months.

According to data from Cointelegraph Markets Pro and TradingView, ETH’s current price stands at $3,796, which is 28% lower than its all-time high of $4,891 achieved on November 26, 2021.

Alongside ETH’s rally, daily trading volume has also jumped by 68%, currently standing at $33.29 billion. With a market capitalization of $453 billion, Ether solidifies its position as the second most valuable cryptocurrency, as reported by CoinMarketCap.

In addition to the overall bullish trend in the crypto market, driven by increased investments in spot Bitcoin ETFs and the upcoming Bitcoin supply halving, other fundamental factors and on-chain metrics support Ethereum’s upward momentum.

Reducing Supply on Exchanges

One factor driving Ether’s upward momentum is the decrease in supply on exchanges. According to data from Glassnode, the amount of ETH held on exchanges has reached a 20-month low of 13.14 million ETH, dropping by 7.7% in the last 90 days.

The total balance of inflows and outflows of ETH on exchange wallets has seen a significant decline since October 2023, when withdrawals from trading platforms began to increase. This drop coincides with a 130% surge in Ether’s price during the same time period.

The decrease in ETH balances on exchanges suggests that investors are moving their tokens into self-custody wallets, indicating a lack of intention to sell in the near future. This is supported by a recent increase in accumulation by large holders. Glassnode data shows that wallets holding $100,000 or more worth of ETH have been on the rise since the beginning of February.

The chart above illustrates that the number of wallets holding $100,000 or more has grown from 94,620 on January 1 to 141,406 on March 4. This indicates that whales have not sold during the recent ETH rally, but rather continued to accumulate, suggesting their belief in further gains.

The Rise of Ethereum Staking

The increasing popularity of Ethereum staking is contributing to the decreasing availability of ETH tokens for trading. According to data from Dune Analytics, there is now over $31.58 million ETH, worth $119.8 billion, staked on the Beacon Chain – representing 26.3% of the total ETH supply. This involves over 987,000 individual validators.

Ethereum staking has been made more accessible through liquid staking solutions such as Lido, Rocket Pool, and EtherFi. These platforms allow for staking of amounts less than 32 ETH and enable the use of staked assets as collateral in decentralized finance (DeFi) applications.

The growing popularity and adoption of Ethereum liquidity protocols is evident in the total value locked on EtherFi, which has surpassed $2 billion according to data from BlockBeats.

Ethereum’s open interest approaches the 2021 peak

The demand for leverage has led to a surge in ETH futures open interest (OI), which is currently at $11.98 billion, inching closer to the highest point of $13 billion seen on November 9, 2021.

Data from Coinglass reveals that Ether futures OI surpassed $8 billion on February 12, after being stuck below this level for over two years. Since then, the OI has skyrocketed by almost 50% in less than two weeks, indicating a rise in demand for leveraged ETH positions.

The current on-chain and derivatives markets for Ethereum demonstrate investors’ optimism and anticipation for the approval of a spot Ether ETF. Additionally, the upcoming Dencun upgrade may also be providing some bullish momentum for the ETH price.