Dencun upgrade, anticipation of spot ETFs, and the broader market’s expansion significantly strengthen Ethereum’s optimistic outlook in February.
Ethereum’s native token, Ether
ETH $2,517, has experienced a notable surge this week, climbing approximately 12%, including an upside move of 1.5% today. This upward trajectory has propelled Ether’s value to $2,540, marking its highest price point since Jan. 19.
Several factors contribute to Ethereum’s price movements, from technical upgrades and market sentiment to broader economic indicators. Let’s delve into the reasons behind Ether’s price increase in recent days.
Bullish market sentiment
Ether’s gains today and this week come in tandem with broader crypto market trends. For instance, Bitcoin
BTC $48,305 comprises over 50% of the total crypto market capitalization and has grown by more than 15% week-to-date to around $48,600.
Crypto traders have turned bullish on two key factors. First, the newly approved Bitcoin exchange-traded funds (ETFs) have attracted $10 billion in capital in a month, signifying a growing institutional interest in crypto investment vehicles.
Second, risk sentiment among traders has notably improved following Federal Reserve Chairman Jerome Powell’s recent interview on 60 Minutes. In the discussion, Powell hinted at the possibility of reducing interest rates later in the year, sparking optimism in the crypto markets.
Ether and other top-ranking cryptocurrencies typically trade in sync with Bitcoin. As of Feb. 11, the daily correlation coefficient between ETH and BTC was 0.96, underscoring why Ether was lifted by Bitcoin’s rising tide.
ETH/USD and BTC/USD daily correlation coefficient. Source: TradingView
This strong statistical relationship highlights the interconnected nature of the cryptocurrency market and sheds light on Ether’s significant rally in recent times, aligning closely with Bitcoin’s performance trends.
Dencun upgrade
Ethereum is on the brink of several technological upgrades, most notably the upcoming Dencun upgrade. Scheduled for March 13, this upgrade aims to improve network efficiency and Layer-2 support, introducing key scalability enhancements.
Historically, Ether prices have reacted positively ahead of key network upgrades. For instance, the cryptocurrency jumped 100% ahead of the Merge upgrade in September 2022. Similarly, it swelled approximately 95% ahead of the London Hard Fork in August 2021.
ETH/USD weekly price chart. Source: TradingView
These upgrades typically introduce improvements in scalability and security, making Ethereum more attractive to developers and users. This can drive speculative interest as investors anticipate increased adoption and demand for ETH.
Ethereum staking milestone
Recently, Ethereum achieved a significant feat, with 25% of the circulating supply now staked. Theoretically, this milestone shows that more traders are confident in the Ethereum blockchain’s long-term viability.
Ethereum total-value-staked. Source: Glassnode
Ethereum ETF expectations
Ethereum’s price rise today also took cues from growing euphoria about the potential approval its spot ETF applications.
For instance, in January, Standard Chartered predicted that the U.S. Securities and Exchange Commission (SEC) will likely approve all the pending spot Ethereum ETF applications, including those by BlackRock, Ark Invest, and Fidelity, by May 2024.
Moreover, the firm anticipates that the approval could skyrocket the ETH price to as high as $4,000 if it follows Bitcoin’s trajectory during its ETF approval process.
ETH price technical bounce
Ether’s recent price increase is part of a larger recovery that began on Jan. 25, following its touch on support confluence. This confluence comprise the lower boundary of a prevailing ascending broadening wedge pattern and ETH’s 0.382 Fibonacci retracement line at around $2,270.
ETH/USD daily price chart. Source: TradingView
As of Feb. 11, ETH’s price is eyeing a rise toward the 0.0 Fib retracement line at approximately $2,720, which is possible given that its daily relative strength index (RSI) is at 65.60 — not yet in the overbought territory (above 70).
The bearish case
Conversely, the bears will try to pull ETH/USD back from its current descending trendline resistance. This might result in a drop to the lower edge of its ascending broadening wedge pattern, aiming for the 50-day exponential moving average (50-day EMA; the red wave) situated near $2,340.
ETH/USD daily price chart. Source: TradingView
The potential for a bearish reversal also emerges near the horizontal resistance level at approximately $2,620, suggesting a possible decline towards the 0.236 Fib line at around $2,440.
