• Ethereum price has been coiling up for nearly a month, indicating a massive breakout move shortly.
  • While the short-term scenario hints at a bearish descent, the mid-to-long-term outlook remains bullish.
  • Two on-chain metrics suggest a potential upswing that could propel ETH to $3,500.

Ethereum price has been neutral and range-bound since the May 19 crash. Due to its consolidation, ETH and other altcoins appear to have developed a massive correlation with BTC. Such an increase in correlation indicates that investors are relying on the flagship cryptocurrency to perform and are hesitant about the rest.

While it does paint a bearish picture, it is ephemeral. Once the consolidation ends, Ethereum price will likely outperform BTC as it did in the recent bull run.

Ethereum price eyes 60% bull rally

Ethereum price set up a demand zone as it rallied nearly 15% from $2,524 to $2,890 between June 1 and June 3. However, this support area was soon invalidated as sellers pushed ETH below it on June 8, converting it into a supply zone.

The recent attempt to breach past this resistance barrier failed as the Momentum Reversal Indicator (MRI) flashed a sell signal in the form of a red ‘one’ candlestick. This technical setup projects a one-to-four candlestick correction, suggesting that ETH is primed for a downtrend.

Therefore, if the selling activity continues, Ethereum price could revisit the 50% Fibonacci retracement level at $2,230 or $2,178.

Such a move will provide the buyers a chance to recuperate and come back stronger. The last time ETH tagged $2,178, it surged 32%. However, this time around, investors can expect a 60% bull rally to $3,500.

For this to happen, Ethereum price needs to successfully produce a decisive 4-hour candlestick close above the supply zone’s upper boundary at $2,668. Doing so will allow the smart contract token to rise toward the range high at $2,914 and then test the supply zone that extends from $3,438 to $3,569.

ETH/USDT 6-hour chart

ETH/USDT 6-hour chart

The reason why Ethereum price might witness a potential spike in buying pressure is in the ETH-BTC correlation chart. As seen below, over the past six months, ETH has experienced cycles where it gets highly correlated to BTC and then shatters this relationship.

From January 21 to February 2, the correlation dropped by 108% to -0.08 while ETH price rose by 33% from $1,200 to $1,600.

Similar drops in correlation were observed three times over the past six months, with the most significant decline seen between April 20 to May 15, during which time Ethereum price rallied by 60% from $2,500 to $4,000.

At the time of writing, the correlation to BTC is hovering around 0.77, sloping to the downside. Therefore, if a similar drop were to occur, Ethereum price will surely see a massive spike in buying pressure that would push ETH to outperform BTC.

ETH correlation to BTC chart

ETH correlation to BTC chart

Further adding credence to this bullish outlook is the average fees on the Ethereum blockchain, which has dropped from $55.62 on April 19 to $2.94 today. As a result, investors who were less inclined to participate in the DeFi summer due to high fees will now have the opportunity to explore.

Therefore, this 94% plummet in fees reveals that the network is less congested and hints that new capital will rotate into the ETH ecosystem, thereby pushing Ethereum price higher.

ETH average fees chart

ETH average fees chart

Moreover, the Market Value to Realized Value Z-score for Bitcoin shows a potential bottom formation. Glassnode outlines that this fundamental index is used to assess when Bitcoin is over or undervalued relative to its "fair value."

During the 2021 bull run’s peak, MVRV Z-score hit 7, an overbought zone. Since then, this indicator has dropped 72% to 1.96. Such a drastic decline is quite similar to the one seen during the initial phase of the 2013 bull run.

If history were to repeat and a similar reversal occurs, investors can expect Ethereum price to continue its ascent. Such a move adds credence to the 60% bull rally thesis explained above and could be the start of the next leg up.

ETH MVRV Z-score chart

ETH MVRV Z-score chart

Lastly, the fundamentals of Ethereum are strong as ever, especially with the blockchain transitioning to ETH 2.0 via the London hardfork, which will bring the much-awaited EIP-1559 that will push Ethereum’s narrative as an investment asset higher.

From a macro perspective, all these events will help ETH break away from BTC’s grasp and make it an uncorrelated asset, at least in phases, that will allow Ether to outperform the flagship crypto, just as it did during the recent bull run.

Therefore, to sum it up, Ethereum price looks to head lower short-term, allowing it to recuperate and invite the sidelined investors to jump in. The rally that stems after this downtrend is most likely to slice through the resistance levels set up during the consolidation and head straight to $3,500.

If such a move were to occur, it would generate FOMO, attracting retail investors, push Ethereum price to all-time highs at $4,384 and, in a highly bullish case, to new highs.

However, if the buyers fail to jump on the bandwagon at $2,178, leading to a breakdown of the 79% Fibonacci retracement level at $1,976, it will trigger the threat of further decline. Therefore, this move does not invalidate the bullish thesis but only delays it.

Ethereum price might retest the May 19 lows at $1,619 before kick-starting the upswing in certain circumstances.

 

Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.

If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.

FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.

The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.

Cryptos feed

Latest Crypto News


Latest Crypto News & Analysis

Editors’ Picks

Bitcoin Weekly Forecast: Musk changes tune on BTC as adoption and miners continue to make headway

Bitcoin price revival appears to be going well considering the recent sweep of the July 15 swing high. While this uptick in the market value of BTC is bullish, there is bound to be a minor pullback that will help catapult the pioneer cryptocurrency higher.

More Bitcoin News

TRON price sits on strong support while TRX bulls plan 70% breakout

A brief technical and on-chain analysis on TRON price. Here, FXStreet's analysts evaluate where TRX could be heading next as it seems bound for higher highs.

More Tron News

Cardano might pull back to $1.11 before heading higher

Cardano price has seen a quick run-up after approaching the trading range’s lower limit. While this uptick in ADA’s market value was obvious, investors should be aware of a minor pullback before the so-called “Ethereum killer” embarks on another leg up.

More Cardano News

Dash price must overcome imposing resistance to breakout

A brief technical and on-chain analysis on Dash price. Here, FXStreet's analysts evaluate where DASH could be heading next as it consolidates.

More Dash News

BEST CRYPTO BROKERS/EXCHANGES



Bitcoin Weekly Forecast: Markets revert to mean, but BTC price remains indecisive

Bitcoin price shows considerable strength after springing from the recent crashes. Still, it is uncertain whether the current bullish impulse will morph into a new uptrend or lead to a more profound decline.

Read the weekly forecast

BTC

ETH

XRP