Ethereum, the Cryptocurrency Powerhouse, Continues to Dominate the Market
On January 15th, the price of Ethereum surpassed $2,500, further solidifying its lead over Bitcoin after the approval of the ETF. Analyzing on-chain data trends provides valuable insights into the factors driving this increase.
The trading strategy of “buy-the-rumor, sell-the-news” is widely utilized by speculators who purchase assets before a significant news event, anticipating that they can sell at a profit once the news is confirmed. Bitcoin speculators successfully employed this strategy leading up to the approval of the spot Bitcoin ETF, earning historic gains.
The journey towards the approval of the Bitcoin spot ETF faced several obstacles, with the U.S. Securities and Exchange Commission (SEC) expressing concerns regarding market manipulation, oversight, and liquidity. However, on June 15, 2023, the situation took a positive turn when BlackRock, one of the largest asset management firms globally with over $13 trillion in assets under management (AUM), officially filed for a spot Bitcoin ETF with the SEC. This sparked optimism about Bitcoin derivatives and fueled rumors in the market.
Following BlackRock’s filing, the price of Bitcoin, which was trading at around $24,800, experienced a 25% rally within the first two weeks, reaching $30,000 for the first time in 12 months. Between June 15th and January 11th, when the SEC finally confirmed the news, the price of Bitcoin almost doubled, climbing from $24,800 to a high of $48,890. This resulted in a 97% profit for speculators who bought the rumor after BlackRock’s filing. As expected, after the SEC approval, profit-taking caused the price of Bitcoin to drop by 15% to $42,500 on January 15th, completing the full cycle of the buy-the-rumor, sell-the-news strategy.
With the Bitcoin ETF approval now concluded, investors have shifted their focus to Ethereum. BlackRock filed for a spot Ethereum ETF on November 16th, and in a recent interview on January 12th, BlackRock CEO Larry Fink reiterated the value of an Ethereum spot ETF as an asset class.
Interestingly, while the price of Bitcoin has decreased by 3.8%, Ethereum has seen a 13.5% increase in the past week, outperforming Bitcoin by approximately 10%.
Moreover, strategic on-chain movements by Ethereum whales since January 11th have also confirmed early indications of the buy-the-rumor strategy playing out in the Ethereum market.
Ethereum whales, which are large investors, have acquired $1.4 billion worth of ETH since the Bitcoin ETF approval verdict. This accumulation by major stakeholders is interpreted as a strong bullish signal, as it increases overall confidence in the cryptocurrency’s ecosystem.
Additionally, the timing of this buying spree suggests that investors are purchasing Ethereum with the expectation that the approval of Bitcoin’s ETF will increase the likelihood of positive verdicts for ongoing Ethereum applications from the SEC.
The Ethereum Dominance chart further supports this notion, as it shows that Ethereum has gained 14% more market share between January 10th and January 15th, while the price of Bitcoin has declined by a similar 15%. This indicates that speculative traders are selling the news on Bitcoin and eagerly buying the rumor ahead of a potential approval for a spot Ethereum ETF.
Based on these data points, the accumulation by large holders and the rising Ethereum dominance, it appears that the buy-the-rumor strategy is now prevalent in the Ethereum market. Given that Bitcoin experienced a 97% gain leading up to the spot ETF approval, a similar performance could potentially push Ethereum’s price to $5,000 in the event of a positive outcome.
In the short term, Ethereum bulls will need to overcome the $2,900 resistance level to maintain the upward momentum. The Global In/Out of the Money chart by IntoTheBlock, which identifies potential support and resistance points based on the historical entry prices of current Ethereum holders, also supports this price prediction.
Currently, with Ethereum trading above $2,500, 91% of all Ethereum holders are in profitable positions. With the focus on the Ethereum ETF approval process, these holders may become less inclined to sell.
However, if the price of Ethereum unexpectedly drops below $2,000, the 8.5 million holders who purchased 4.1 million ETH coins may pose significant resistance if they decide to take profits as prices approach their break-even point.
Overall, the bullish prediction for Ethereum could be invalidated if the price unexpectedly falls below $2,000. However, with 7.9 million investors holding 43.4 million ETH at a maximum price of $2,039, it is likely that they will have enough buying power to counteract any bearish pressure.
