The price of ethereum (eth) has stabilized above $2,300 on February 6, while bitcoin (btc) and the rest of the crypto markets struggle with a setback of $37 billion.
Vital on-chain data trends highlight how rising eth 2.0 staking inflows ahead of the upcoming Dencun upgrade has contributed to the positive start to February despite bearish headwinds prevailing in crypto markets.
ethereum price outperformed the market in February
ethereum price has bucked market trends this week, making considerable gains in the first 5 days of February 2024, while bitcoin (btc) and the rest of the cryptocurrency market have stumbled.
Between January 31 and February 6, the price of eth rose from $2,241 to $2,326, as shown in the chart below. Meanwhile, the total crypto market capitalization has dropped by 2%, losing $37 billion during that period.
Effectively, this illustrates that ethereum price is currently outperforming the overall market trend. ethereum's resilience amid the overall market slowdown suggests there are several underlying factors at play.
Rumors about the eth spot ETF continue to circulate. But in particular, the recent rally in coins deposited on the eth 2.0 beacon chain appears to be the dominant driver of ethereum's relative strength in February 2024, so far.
Staking deposits exceed $300 million before Dencun upgrade
Staking on ethereum 2.0 has become a key factor within the ethereum ecosystem since the Shappella upgrade marked the completion of the Proof-of-Stake (PoS) transition in April 2023.
More recently, Vitalik Buterin raised a series of grid improvement proposals, including an increase in the gas limit. Additionally, the long-awaited Dencun upgrade, also known as Cancun-Deneb, which is expected to be completed on February 7, focuses heavily on increasing scalability.
This spate of positive network developments appears to have boosted stakeholder confidence in recent weeks.
Cryptoquant's Stake Inflow metric tracks the number of coins deposited into eth 2.0 beacon chain contracts on a daily basis. The chart below shows that inflows of 143,103 eth (~$329 million) into staking on January 31 and 137,472 eth on February 2 were the highest recorded since December 3, 2023.
Staking deposits are crucial to the security and functionality of any PoS network. However, when there is a notable increase in betting during a widespread market downturn as noted above, it suggests that investors within that cryptocurrency ecosystem maintain a positive long-term outlook.
Therefore, instead of joining the market sell-off, ethereum holders are increasingly betting to ride out the market correction by earning passive income.
Even if temporarily, staking deposits effectively reduce selling pressure by reducing the number of coins available for trading on exchanges. This partly explains how eth price has managed to outperform the market in February 2024 so far.
The timing also suggests that stakeholders are confident in a positive outcome from the upcoming Dencun upgrade.
ethereum price forecast: $2,500 target in sight
In summary, increased staking and positive sentiment around upcoming network upgrades have underpinned eth price action in recent weeks. With these factors still in play, ethereum could make another attempt to reach the elusive $2,500 price target in the coming days.
However, the bulls face major short-term resistance at the $2,350 area.
Global inflow and outflow data from IntoTheBlock shows that 1.34 million current holders had acquired 4.68 million eth at the average price of $2,358. Having held losses for almost a month, they might be tempted to exit once the price approaches its breakeven point.
But if the bulls can scale that resistance, it could open the doors to a retest of $2,500 as predicted.
On the other hand, the bears could overturn this optimistic prediction by forcing a reversal below the $2,000 area. However, as shown above, the bulls could mount a formidable buy wall of support at $2,040.
