Institutional investors are diversifying their cryptocurrency holdings, and ETH is the main beneficiary of this diversification effect.
Let’s dig in.
Ethereum has the attention of major institutional players, with ETH-related investment products attracting $113 million — nearly 50% of the total of crypto inflows recorded last week. Grayscale ETHE inflows have been increasing over the last 30 days and accelerated dramatically overnight relative to last week (4447 inflows in 24 hours), per Grayscale data below.
The crypto platform is up more than 120% since the start of 2021. Grayscale has 3.18 million ETH under management valued at $5.7 billion in aggregate.
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Bitcoin and Ethereum are consolidating close to all-time highs, trading above $55,000 and $1,750, respectively at the time of publishing.
However, ETH has gained momentum relative to bitcoin over the the last 48 hours and trades horizontally above 0.032 Satoshis. The subsiding ETH/BTC sell-off alongside increasing institutional inflows and expectations of EIP-1559 provide confluence for a potential rally in the coming days and weeks.
Zooming in on the ETH/USD pair, basic moving average technical analysis suggests that momentum is still bullishly biased, with ETH trading above the 20-daily EMA at $1,742.
Provided ETH maintains its daily candle close above this level, then a major trend-change this week is unlikely.
Failing a price breakdown inspired by apparent bearish sentiment (anecdotal), a $2,500 price-tag for ETH remains highly probable by the first week of April, if not by the end of March.
At the time of publishing, futures funding rates are neutral (and negative on some exchanges), which suggests that immediate downside liquidity is limited. Funding rates are periodic payments either to traders that are long or short based on the difference between perpetual contract markets and spot prices. When the market is bullish (expecting higher prices), the funding rate is positive, and long traders pay short traders. When the market is bearish (expecting lower prices), the funding rate is negative and short traders pay long traders. This counter-indicator is often touted as a prelude to a potential ‘long or short squeeze’.
That being said, there’s no such thing as perpetually positive vibes in this racket.
In the event that this consolidation structure cascades into a sell-off, then markets will look to the 50-daily EMA at $1,617 as a support level for a bounce. This would represent a 17% downturn from peak to trough.
Ultimately, corrections are fresh opportunities to accumulate more bitcoin and ethereum, and unless a new technical low is printed on the charts, there’s no reason to expect the bull market to end at this stage — especially with a backdrop of $1.9 trillion in stimulus by the US Federal Reserve.
While proper risk management is essential no matter the odds, new all-time highs are still more likely at this stage of the bull market.
Catch you next time.