ethereum price hit a high of $3,500 on February 29, taking its monthly gains to a remarkable 56%; Market supply trends suggest another rally towards $4,000 could follow in March 2024.
ethereum dominated the price charts in February 2024, outperforming its rival mega-cap layer 1 coins including bitcoin (btc), Solana (SOL), and Cardano (ADA).
On-chain analysis examines key data trends that put eth in advantageous positions for another dominant bullish price performance in March.
ethereum supply decreases; $2.1 billion transferred to long-term storage
The successful execution of the Dencun upgrade testnet and growing traction around eth ETF filings were the main bullish catalysts for ethereum's 56% price growth in February 2024.
However, on-chain data trends suggest that lingering impacts from investor reaction to these key events could see eth maintain its upward trajectory for the remainder of Q1 2024.
Firstly, there has been a positive shift in ethereum stakeholders' inclination towards a longer-term investment horizon and passive income yield rather than short-term profit taking.
To this end, CryptoQuant Exchange Reserves monitor real-time changes in investors' eth balances held on crypto exchanges and trading platforms.
Exchange reserves stood at 14,433,873 eth at the close of January 31, as shown in the chart below. But that figure has now dropped significantly by 663,322 eth to reach 13,770,551 eth at the time of writing on February 29.
Valued at current prices of $3,500, this implies that investors have transferred $2.3 billion worth of eth from trading wallets to long-term storage and staking contracts.
Basically, this massive decline in currency reserves means that there is now $2.3 billion less supply of eth available to trade in the spot markets.
In particular, ethereum offers a wide range of performance opportunities that could incentivize investors to pass up opportunities to book profits early. Whale investors can access passive income rewards with a 4% APR from the beacon chain, while retail investors have a wealth of high-yield DeFi staking protocol options.
With the recent surge in demand for liquidity staking derivatives and the expected improvement in transaction performance due to the Dencun upgrade scheduled for March 13, eth market supply is likely to decline further in the coming months. next weeks.
If macro market sentiment remains positive, this market-induced shortage could push the price of eth towards the $4,000 mark by March 2024.
Growing demand: 1.84 million new users joined the ethereum network in February
ethereum's dominant price performance in February has evidently improved its market position. Further reaffirming ethereum's bullish outlook for March 2024, the network has welcomed a significant number of new participants over the past month.
Santiment's number of holders metric tracks the number of funded wallets currently registered on a cryptocurrency network. The chart below shows that the eth network welcomed 1.84 million new funded wallets as total holders grew to 115.5 million addresses between February 1 and February 29.
An increase in funded wallets is a clear indication of deepening global retail adoption and a flow of fresh capital into the underlying ecosystem. For context, the bitcoin network saw a drop of 70,000 wallet holder addresses in February, further emphasizing ethereum's privileged position in the markets.
Rising demand for the 1.84 million newly funded eth addresses, combined with the $2.3 billion decline in exchange supply, suggests that market forces are well aligned for the price of ethereum to move towards $4,000. in March 2024.
However, in the short term, the bulls must first scale the main resistance wall at the $3,550 territory.
IntoTheBlock's global inflow and outflow data, which groups all existing eth holders by their purchase prices, also affirms this view.
It shows that 1.2 million addresses that acquired 356,130 eth at the peak price range of $3,543 could mount a daunting wall of resistance as the price approaches its breakeven point.
But if eth price can overcome that hurdle, the rally could accelerate and head towards $4,000 as predicted.
However, ethereum bears could regain control if eth loses the $3,000 support. However, this currently seems unlikely, considering the impending sell-off wall in the $3,100 area.
In that range, 2.1 million investors who bought 1.1 million eth at the average price of $3,090 could engage in frantic buying to avoid falling into net loss positions.
