Some on-chain indicators suggest that the price of Ethereum may be about to rise due to a sharp drop in the circulating supply of ETH on cryptocurrency exchanges.
Monitoring changes in the supply of cryptocurrencies on central exchanges is crucial for making medium-term forecasts, as this indicator provides important information about potential selling pressure on an asset.
Taking into account and taking into account the historical returns of the cryptocurrency market in the fourth quarter, especially in March, the price of ETH may be closer than ever to a bull breakout of $2,000 per coin, which may occur by the end of the year.
Let's look at all the details together and try to shed some light on it.
On-chain data shows positive signs for Ethereum’s future price
Although the overall outlook for the cryptocurrency market is not the best, some on-chain indicators point to very positive mid-term price conditions for Ethereum.
In particular, we can see that ETH balance centralization on exchanges has declined significantly since the beginning of the year, reaching its lowest level since September 2018.
In fact, since January 1, 2023, the number of tokens on CEX has dropped from 145,600 ETH to the current 40,000. This represents a reduction of nearly two million cryptocurrencies currently held in private wallets or staked on the Beacoin chain.
This helps alleviate potential selling pressure on platforms such as Binance, Coinbase, Kraken, Bybit, Okx and others, which typically conduct more trades and open more derivatives short positions.
If this trend continues for a few more months (and demand picks up in the meantime), the price of Ethereum could rise significantly.
Still regarding the changes in stock market reserves, it is worth noting that according to the Santiment platform, about 110,000 ETH was withdrawn on September 4, accelerating the flow of capital to decentralized platforms and wallets.
This is an unusual movement, and behind it may be a whale or a series of individuals with considerable financial power.
Currently, there are approximately 11.588 billion ETH outside the exchange, of which approximately 273,200 are pledged on the Proof of Stake network.
In January 2022, this number was approximately 130,000 ETH: this means that in about a year, more than 14.1 million ETH were taken out of circulation and placed on Ethereum storage contracts or liquidity staking platforms.
Interestingly, Ethereum’s current price is roughly the same as it was back then (April 2022 closing price), so those who locked up the token a year ago would have made a return of around 5-5%.
Will ETH hit $2,000 by the end of the year?
With on-chain data suggesting fertile ground for Ethereum’s price growth, let’s talk predictions: Will Ethereum reach $2,000 by the end of the year?
Let us first assume that, although indicators based on movements within the blockchain are optimistic, the most noteworthy background is the macroeconomic backdrop, especially within the United States, where government bond rates may increase further in September.
This situation could lead investors to reduce allocations to more speculative markets such as cryptocurrencies, negatively impacting the price of Ethereum and the crypto industry as a whole.
Additionally, issues surrounding the possible approval of a Bitcoin spot ETF could also indirectly impact the price of the second-largest cryptocurrency by market capitalization.
In fact, BTC and ETH are known to almost always move in tandem, and catalytic events like the approval of the first legal spot ETF in the U.S. are sure to spark a massive upward trend in Ethereum as well.
Speaking of ETFs, it’s worth noting that the ETF’s ETH futures received SEC approval a few days ago but generated little investor interest with just 20,000 trades.
Returning to our original question, we can confirm that if the Fed reverses its monetary policy strategy by moving to quantitative easing and/or if the SEC approves the first US BTC spot ETF, then the price of BTC is likely to increase. Ethereum will trade well above the $2,000 mark.
Unfortunately, if these two things don’t happen before the end of the year, the on-chain data may not be enough to push the value of ETH to that level.
While these types of indicators work well in the medium term, they are not accurate in the short term.
Some traders are currently shorting ETH, fearing that the weekly candles that have formed since the start of the year will lead to a “bear flag” pattern that often signals the possibility of an imminent decline.
On price drop. The coin price range is $1,440 to $1,370.
