Since spot ETF approval on January 11, ETH price has outperformed BTC, but on-chain data suggests the gap could widen in the coming days.
Ethereum price continues to consolidate its lead over Bitcoin this week, closing above the $2,500 mark on each of the last four trading days starting January 15.
Two key trading indicators illustrate how ETH bulls could further assert their dominance in the coming days.
Investors have moved $1 billion worth of ETH from exchange-hosted wallets into long-term storage
As Ethereum price soared on the charts last week, there was widespread speculation that investors could book profits at the $2,500 mark. But interestingly, at the time of writing on January 18, ETH price has been above $2,500 on each of the last three trading days, suggesting that bulls are looking for more gains instead.
Looking beyond the price charts, the recent shift in ETH exchange reserves better suggests that bulls are maintaining their stance. Cryptoquant's exchange reserve data provides a real-time snapshot of the total units of a cryptocurrency currently held in wallets hosted on exchanges and trading platforms.
As of January 11, investors held a total of 14.8 million ETH coins in wallets hosted by the exchange. Interestingly, the number has now dropped to 14.7 million ETH as of January 18th.
Ethereum (ETH) exchange reserves vs. price | Source: CryptoQuant
As shown above, investors have now moved 133,271 ETH coins from exchange wallets to long-term storage in the last 7 days. converting exchange-hosted wallets into long-term wallets, easing concerns about possible widespread profit-taking at the $2,500 level.
Typically, a decline in foreign exchange reserves is often positive for the short-term price performance of a cryptocurrency. This essentially means investors are moving their coins from trading wallets to long-term storage.
The preference for long-term storage during a price rally signals investor confidence and intent to wait for further gains. Given the decline in exchange supply over the past week, it is not surprising that ETH price has been consolidating above the $2,500 support level since January 15.
Importantly, historical trends show that periods of rapid decline in ETH foreign exchange reserves were often followed by an upward price trend. If the pattern repeats, Ethereum holders can expect a rally towards $2,600 in the coming days.
As supply on exchanges decreases, ETH attracts more demand
Secondly, the total number of active ETH sell orders has now fallen well below market demand as supply on the Ethereum exchange has declined over the past week. This current Ethereum spot market dynamic is another key on-chain indicator that suggests ETH will extend its lead over BTC in the coming days.
IntoTheBlock's aggregated exchange order book chart tracks the total active buy/sell orders of a cryptocurrency across multiple exchanges.
There are currently active buy orders for 357,490 ETH listed on 20 crypto exchanges including Binance and Coinbase. Meanwhile, the bears have placed sell orders for just 250,750 ETH.
The chart above shows that Ethereum market supply has fallen short of demand by 106,740 ETH. Intuitively, when demand for an asset exceeds supply by many times, it signals a prevailing bullish sentiment within the ecosystem.
In summary, the ongoing decline in ETH foreign exchange reserves has now led to excess demand in the spot markets. These two key short-term indicators could accelerate Ethereum's price rise and further extend its lead over BTC.
ETH Price Prediction: $2,700 Could Be the Next Target
Based on the two critical on-chain data points analyzed above, Ethereum price is likely to remain in an uptrend towards $2,700 in the short term.
But for the bulls to confirm this bullish forecast, they must first climb the resistance level at $44,000. IntoTheBlock In/Out of the Money data grouping current Ethereum holders by their historical entry prices. also confirms this forecast.
This shows that 1.78 million existing investors had purchased 1.84 million ETH at the highest price of $2,612. If these holders attempt to sell as ETH approaches its break-even point, it could inadvertently trigger a trend reversal.
But if the bulls manage to break the selling wall at $2,612, the $2,700 area could be the next target for Ethereum price.
On the other hand, in the event of a downward reversal, bulls can rely on the historically significant buying wall at $2,400 as initial support.
The chart above shows that 853,920 addresses purchased 4.5 million ETH at an average price of $2,414. If these holders make desperate efforts to cover their positions, the Ethereum price could immediately rebound from this area.
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