Dencun’s latest developments
The price of Ethereum has dropped by 5% since reaching its peak last week, leading to speculation about whether the asset will reach $5,000. The highly anticipated Ethereum Dencun upgrade was launched on the mainnet on March 13, but the price of ETH has struggled to maintain its upward momentum since then. This has raised doubts about the possibility of a near-term rally towards $5,000.
When the successful test run of the Dencun upgrade was announced by Ethereum developers on January 30, it generated bullish expectations among ETH traders. As a result, over the following 40 trading days, the price of Ethereum saw a rapid increase of 70%, reaching a peak of $4,092 on March 12. This was largely due to strategic buyers who anticipated lower transaction fees and improved scalability.
However, once the upgrade went live on the mainnet, Ethereum deviated from the broader trend in the crypto market as traders began selling their holdings. CryptoQuant’s taker buy/sell ratio, which analyzes trading activity on crypto exchanges, showed a negative swing as prices exceeded $4,000 in early March. The ratio reached a 40-day low of 0.93% on March 14, just 24 hours after the Dencun upgrade was launched. A negative ratio indicates that there is more selling activity than buying activity in the ETH perpetual swaps markets. This suggests that sellers may be able to push prices even lower, especially during a downtrend.
The selling pressure observed in the Ethereum markets following the Dencun upgrade is a classic example of the “buy-the-rumor, sell-the-news” cycle. This is further supported by the increase in ETH coins being deposited into exchange wallets, indicating that more investors are looking for short-term trading opportunities. The influx of 74,000 ETH coins into exchange reserves this week alone could potentially dilute the market supply. If the demand does not match this increase in supply, the price of ETH may continue to decline and fall below $3,900 in the coming days.
Considering these trends, it is unlikely that the Dencun upgrade will drive the price of Ethereum to $5,000 in the near future, as some optimistic traders initially anticipated. Instead, the price is expected to slide further below $3,900 as more traders sell their coins and increase the supply in the spot market. However, if the price falls below $3,830, it could trigger margin calls and stop-loss orders from investors who bought ETH in that price range. On the upside, the bulls will need to establish a strong support level above $4,050 to regain control of the short-term market momentum.
