ethereum price surpassed the $2,900 milestone on February 19, but the increasing volume of trading activity in eth spot markets could boost it further.
With investors placing bullish bets ahead of bitcoin ETF trading hours, is ethereum price primed for the long-awaited bounce towards $3,500?
ethereum Trading Volume Surpasses $25 Billion Milestone
ethereum price took another giant step on February 19 when it crossed the $2,900 territory to bring its gains for February 2024 to the 30% mark. Record inflows into bitcoin ETFs and institutional entities in recent weeks have been a major driver of the market rally.
eth witnessed an unusual surge in trading activity in the morning UTC hours of February 19, likely as strategic investors looked to place bullish bets ahead of the resumption of bitcoin ETF trading sessions in the US. USA
Santiment daily trading volume tracks the face value of confirmed transactions involving a particular cryptocurrency within a 24-hour period.
The chart below illustrates an initial drop in eth trading at the close of bitcoin ETF trading on Friday, February 16. But since then, it has seen a notable increase.
At the time of writing, around 10:30 GMT on February 19, eth trading volume has increased to $26.7 billion, the highest since January 11.
Typically, increasing trading volume is bullish for several reasons. Firstly, it indicates strong investor interest in the underlying cryptocurrency. But most importantly, increased market liquidity allows investors to execute trades at favorable prices without ruining the bullish price momentum.
bitcoin ETFs acquired over 17,000 btc in the last trading week between February 12 and February 16. If they continue on the same trajectory, trading volume on ethereum and other mega-cap altcoins could increase further over the past week.
Investors converted $220 million worth of eth into long-term savings in 3 days
The flow of ethereum into exchanges since the close of trading on February 16 is another critical metric that points to investors' conviction that another bullish week is ahead.
CryptoQuant's Exchange Reserves metric tracks the total amount of coins deposited in wallets hosted on recognized exchanges and trading platforms. This serves as an indicator to measure investors' tendency to sell in the short term.
As shown in the chart below, investors had initial balances of 14,060,510 eth as of February 16.
But interestingly, investors sent over 80,222 eth coins to long-term storage and staking contracts in the last 3 days, leaving only 13,980,288 eth in their trading wallets at the time of this publication on February 19.
A decrease in foreign exchange reserves usually has a positive impact on asset prices, since in practice it leads to a temporary cut in market supply. As expected, a closer look at the chart shows how the price of eth has been trending upwards since currency reserves began to fall rapidly in November 2023.
Valued at the 5-day simple moving average price of $2,730, investors have moved approximately $220 million worth of eth into long-term storage.
Reducing market supply by such a large margin could further accelerate the rally if market momentum remains bullish over the next week.
Forecast: Can ethereum Price Reach $3,500?
Based on the trading volume and currency reserve trends discussed above, there is overwhelming bullish sentiment among investors that the eth price could make another jump towards $3,500 in the coming week.
However, eth is currently facing an impending sell wall at the $3,000 psychological resistance.
Global inflow and outflow data from IntoTheBlock shows that 4.5 million addresses received 1.7 million eth inflows at an average price of $3,049. Considering that they had been at a loss for almost 3 years, some of them might try to make some profits.
But if the bull can scale this resistance zone, a break towards $3,500 could be in play.
On the downside, the bears could regain a foothold in the market if they can force a reversal below $2,000. However, as seen above, the 4 million addresses acquired 3.3 million eth at a minimum price of $2,640.
To avoid falling into losses, such investors could engage in frenzied buying to cover their positions and possibly trigger an instant eth price rally.
