Can the Bulls push for $2,700?

Ethereum (ETH) price has been hovering between $1,930 and $1,960 after another failed attempt to breach the $2,000 range this week. While on-chain data currently presents risks of Ethereum supply squeeze, the surge in staking has yet to be reflected in recent ETH price action.

Since the completion of the Ethereum 2.0 merger in April 2023, ETH has seen an unprecedented increase in staking activity. But remarkably, the continued increase in Ethereum 2.0 staking activity did not lead to a significant increase in the price of ETH as many had predicted.

Ethereum staking activity is at an all-time high

According glass knotETH Staking hit an all-time high in May 2023. But over the past month, investors have continued to lock in more coins, further boosting the rating.

The chart below shows that between June 1 and July 4, ETH holders locked up an additional 1 million ETH coins. This brings the total ETH staked to around 30.6% of the total circulating supply.

Ethereum supply crunch, June 2023 |  Offer in smart contracts
Ethereum supply crunch, June 2023 | Offer in smart contracts, source: Glassnode

Offer in smart contracts summarizes the total percentage of an asset’s outstanding supply that is currently locked in DeFi staking protocols. It secures the network and provides liquidity for the projects built on it.

A supply crunch usually occurs when the supply of an asset is limited or restricted. This often leads to astronomical price increases due to temporary difficulties in obtaining the asset.

As staking activity increases, the supply of tokens available to execute market orders decreases proportionally. If this condition persists, it could lead to a compression of Ethereum supply.

Ethereum supply squeeze unlikely due to downward burn rate trend

Another critical factor impacting the net supply of Ethereum is the burn rate. This refers to the percentage of existing parts that are burned and removed from supply. This can take the form of destroying existing parts or shrinking newly created parts.

In May 2023, Ethereum saw a spike in burn rate due to the memecoin rave sparked by the advent of PEPE. At its peak, around 14,600 ETH was burned on May 5, destroying millions of dollars worth of coins. But since then the burn rate has decreased significantly.

In the two months between May 5 and July 4, daily ETH consumption decreased by 80%, from 14,967 to 3,060.

Ethereum supply crunch, June 2023 |  fresh burnt
Ethereum supply crunch, June 2023 | Fresh burnt | Source: Santiment

Ethereum Fees Burned is a deflationary mechanism that removes ETH coins from circulation by permanently destroying some of the fees previously issued to node validators. As seen above, fees burned are positively correlated to price.

More ETH coins are taken out of circulation when fresh burnt increases and the shortage of supply triggers a price spike.

But given the reduction in fees burned over the past few weeks, this offsets the impact of ETH’s surge. This can be identified as one of the reasons why the ETH supply squeeze did not take hold.

ETH Price Prediction: Correction Ahead of Another Attempt at $2,000

Ethereum has not been able to sustain the consistently high transactional activity needed to trigger an increase in the fee utilization rate. Therefore, ETH is likely to retrace below $1,800 before attempting the $2,000 cap once again.

However, the bulls could offer initial support around $1,850. In this zone, the 6.27 million investors who bought 13.41 million ETH at the average price of $1,867 could prevent the decline.

But if this support line breaks, then ETH will likely fall further towards $1,750

Ethereum Price Prediction, June 2023 |  fresh burnt
Ethereum Price Prediction, June 2023 | GIO | Source: Santiment

However, the bulls also have a good chance of staying in control if they manage to breach the $2,000 mark. But as seen above, the giant sell wall mounted by 7.3 million holders who bought 33 million ETH coins at the minimum price of $1,987 could pose a challenge.

Nonetheless, if the Ethereum supply squeeze takes hold, ETH could finally rise above the $2,000 resistance and push toward $2,700.


In accordance with Project Trust guidelines, this price analysis article is provided for informational purposes only and should not be considered financial or investment advice. BeInCrypto is committed to providing accurate and unbiased reports, but market conditions are subject to change without notice. Always do your own research and consult a professional before making financial decisions.

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