Ethereum bull flag as ETH gears up for “Uptober”

Ethereum climbed back above the $4000 psychological level on Monday and has steadied around $4,150 today, having recovered from its September low. ETH trades up 6% from the 3825 low hit last week, spurring optimism that the second-largest cryptocurrency will resume its bull run in October. 

A combination of on-chain metrics, adoption news, seasonality, and technicals support further gains for ETH. 

ETH supply on exchange drops to a multi-year low 

On-chain data suggests shifting market dynamics, which could indicate that ETH is on the verge of a major price move. ETH reserves on exchanges have been steadily declining in recent months and are now sitting at a 9-year low. This signals that investors are withdrawing tokens from centralized exchanges, a move often linked to long-term accumulation. According to Glassnode data, over the past three months, investors have accumulated 2.7 million ETH, valued at $11.3 billion. A declining supply paves the way for a strong rally, which could be triggered by rising demand. 

Institutional buyers return  

Institutional demand is showing signs of recovering, with ETH ETFs recording $546.9 million in net inflows on Monday, the strongest level of net inflows in 6 weeks. The rebound in inflows follows five straight days of outflows last week, totaling $795.5 million, the worst week for ETH ETFs since its launch. Should institutional demand persist, this could help ETH climb higher. 

Meanwhile, corporate treasury demand remains robust. BitMine continues its Ethereum treasury strategy, increasing its holdings by 234,850 ETH, taking its total holdings to 2.65 million ETH, valued at around $11 billion. 

SWIFT Test adds bullish case 

Beyond exchange data, recent adoption news is adding to the bullish case for ETH. SWIFT, the global payments messaging network, has reportedly stated testing Ethereum’s Linea, a Layer-2 scaling solution. Given that SWIFT connects 11,000 banks globally and processes more than $150 trillion in transactions annually, these reports carry weight, demonstrating that financial institutions are exploring Ethereum technology for practical applications in the traditional financial system. Such integration could fuwl demand for ETH over time. 

Seasonality supports October gains 

Ethereum trades -6% lower across September, aligning with historical averages for a month that is typically weak for Ethereum. According to data from CoinGlass, October and beyond are typically bullish months for ETH, with a return is 8.84%. Furthermore, the data also show that in cases where ETH fell across September, it was followed by gains in October, and on most occasions, these gains were double-digit. However, it's worth noting that past performance is not indicative of future gains. 

ETH technical analysis 

ETH/USDT trades in a potential bull flag bullish continuation pattern. From its record high of 4955, the price trades in a falling channel. Recently, ETH/USDT found support on the 100 EMA, rebounding higher to test the 50 EMA resistance. 

Buyers will look to push the price above the 50 EMA at 4210 to bring 4610, the upper band of the falling channel, into focus. A rise above here is needed to break out of the bull flag pattern and extend gains towards 4750, the September high, and 4955, the record high. 

Failure to rise above the 50 EMA could see ETH retest 4000 and the 100 EMA at 3880. Below here 3550, the 0.5% Fib level comes into focus.