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Ethereum could soon experience a supply shock thanks to EIP-1559 and prices holding on top of a massive demand wall.
Ethereum Ready to Break Out
Some of the most prominent analysts in the cryptocurrency industry believe that Ethereum is poised for higher highs.
Twitter user Rekt Capital maintains that the second-largest cryptocurrency by market cap has “successfully” retested a crucial support level. Such price action appears to be part of all the “right things” ETH is doing “towards confirming a breakout.”
$ETH has successfully retested this blue Lower High resistance as new support
ETH is doing all the right things towards confirming a breakout#Crypto #Ethereum https://t.co/M5XRZsEEUL pic.twitter.com/kEhSbDY6AR
— Rekt Capital (@rektcapital) August 24, 2021
Transaction history shows that the $3,140-$3,234 price range is indeed a crucial interest area. IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model shows that more than 850,000 addresses have previously purchased over 9.5 million ETH around this price level.
Given the magnitude of this demand wall, bears will struggle to push prices down. ETH holders within the $3,140-$3,234 price range could do anything to prevent seeing their investments go “Out of the Money.” They may even buy more tokens in the event of a downswing to prevent prices from falling further.
While Ethereum holds on top of stable support, the number of ETH tokens held on cryptocurrency exchanges continues declining at an exponential rate.
Since the beginning of the month, more than 842,000 ETH have been depleted from trading platforms, representing a 5.32% decline. Additionally, roughly 83,500 ETH have been burned since the implementation of EIP-1559 in the London hardfork.
The declining ETH supply on known cryptocurrency exchange wallets alongside the rising number of tokens being put out of circulation paints a positive picture for Ethereum’s future price growth. It technically reduces the number of ETH available to sell, consequently capping the downside potential.
A spike in buying pressure around the current price levels could see Ethereum advance further. The IOMAP cohorts show that ETH faces no significant supply barrier to prevent it from achieving its upside potential. In fact, the only important resistance zone ahead sits at $3,700, which could be considered an intermediate target.