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Ethereum (ETH) Price Decision Time: The Next $2K or $1.5K?

Ethereum briefly lost the crucial $1,850 support. However, on-chain data shows that ETH 2.0 validators appear to be re-running new withdrawals on DeFi protocols to earn higher returns. Will this lead to a recovery in the price of Ethereum in the coming days?

Ethereum failed to consolidate its price gains from the Shapella upgrade. But the strong on-chain fundamentals suggest that investors remain confident in the long-term prospects of the Ethereum network.

ETH coins are released from exchanges

Profit-taking across the Ethereum ecosystem could be in the coming days as the balance of coins deposited on exchanges continues to decline at the current rate. Shortly after the completion of the Shappella upgrade, there was a spike in the amount of ETH being transferred to well-known exchange wallets. This was on the back of ETH2.0 and other investors strategically placing their coins on exchanges for potential sell-offs and short-term profit-taking opportunities.

However, in the past week, investors have started moving their coins off the exchanges, suggesting that the selling frenzy may be over.

After a sharp increase following the Shapella upgrade, the Glassnode data below shows that balances of ETH deposited on exchanges have declined since April 18th.

Specifically, between April 18th and 24th, the balance of ETH on the exchanges was reduced by 262,000 coins. At current market value, this means that $484 million in coins were moved from the exchanges in 5 days.

Ethereum (ETH) price against balance on exchanges. April 2023 Source: glass

Notably, this latest decline has seen the amount of Ethereum (ETH) held on cryptocurrency exchanges drop to its lowest level since March 2021. This drop can be seen as a bullish sign for a number of reasons.

Firstly, when the supply of ETH decreases on the exchanges, it means fewer coins available for purchase on the open market. This could drive up the price of Ethereum, as potential buyers now have to compete for a smaller pool of coins.

Secondly, large investors often transfer their ETH from exchanges as a long-term retention strategy. This indicates trust in the core value of the Ethereum network.

If this trend continues this week, a bullish accumulation wave could spread across the Ethereum ecosystem.

ETH transition from exchanges to DeFi smart contracts

In further confirmation of the bullish outlook, the drop in ETH balance on exchanges appears to have coincided with a corresponding increase in the number of coins held in DeFi smart contracts.

The Glassnode chart below shows how the supply of ETH in smart contracts has increased exponentially. But this comes after the completion of Chabela’s promotion.

Between April 11th and 13th, around 462,000 ETH were withdrawn from DeFi smart contracts. However, over 600,000 ETH (0.504% of the circulating supply) has been deposited back into Ethereum-hosted DeFi protocols since then.

Ethereum (ETH) price versus supply in smart contracts.  April 2023.
Ethereum (ETH) price versus supply in smart contracts. April 2023 Source: glass

Depositing more than 600,000 ETH into DeFi protocols indicates that investors are willing to provide liquidity to the Ethereum ecosystem.

This suggests that bearish investors who panicked before Shappella’s upgrade are regaining confidence. Instead of selling, they seem to be reallocating ETH into DeFi protocols to earn a higher return.

Overall, the influx of money can drive the growth of decentralized finance applications and revenue-generating platforms. This could create an upward cycle of increased liquidity and adoption, leading to an increase in the value of the network and a rise in the price of Ethereum.

Ethereum Price Prediction: It is likely to hold the $1,850 support

Given the bullish momentum flowing around the Ethereum ecosystem, the $1850 support level is likely to be very difficult for the bears to break out.

IntoTheBlock’s global In/Out of The Money data shows that ETH price must break above $1,960 to enter a bullish reversal. However, the resistance of the 2.5 million holders who bought 8.4 million coins around this price level could prove to be a challenge.

If Ethereum price can break above $1,950, it could head for a prolonged rally towards $2,450. But around that area, a potential sale of 8.4 million addresses containing 27.8 million ETH is likely to create a massive roadblock.

Ethereum (ETH) GIOM price distribution data.  April 2023.
Ethereum (ETH) GIOM price distribution data. April 2023 Source: IntoTheBlock.

The bears could negate the bullish stance if ETH fails to hold above $1,850. Although, support from 2.09 million addresses containing 3.11 million ETH could help prevent a drop. If that fails, Ethereum holders can prepare for a sharp drop in the price to the next important support level at $1,450.

Disclaimer

In line with Trust Project guidelines, this price analysis article is for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to accurate and unbiased reporting, but market conditions are subject to change without notice. Always do your own research and consult with a professional before making any financial decisions.

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