#Ethereum ($ETH ) is poised for a potential rally above the $3,400 mark, despite a recent setback that saw its price drop by 18% to $2,826 between July 1 and July 8. This decline led to the liquidation of $313 million in leveraged long positions, disappointing many investors. However, ETH has since rebounded to around $3,100, showing signs of recovery and restoring some confidence among traders.
One positive indicator is the steady decline in Ether supply on exchanges, suggesting that investors are holding onto their assets rather than selling them off. This trend aligns with insights from onchain and derivatives metrics, which indicate growing confidence among Ether traders. Despite the price still being below the crucial $3,400 support level, strong underlying fundamentals hint at a potential price rebound in the near term.
The anticipation surrounding the launch of a spot Ethereum exchange-traded fund (ETF) in the United States adds to the optimism. While regulatory approvals for such ETFs are expected sometime this summer, uncertainty remains regarding the exact timeline. This ambiguity has tempered expectations but hasn't dampened overall enthusiasm, especially given the success of spot Bitcoin ETFs, which recently saw significant inflows totaling $654 million over three days.
Analysts like Matt Hougan of Bitwise project substantial potential inflows into spot Ethereum ETFs, estimating up to $15 billion within the first 18 months of trading. This optimism stems partly from the substantial portion of Ether's supply that is locked in staking and decentralized applications (DApps), which reduces the available circulating supply for trading purposes. Onchain analytics further underscore this, revealing that 40% of Ether's supply is currently locked, contributing to decreased deposits on exchanges over recent months.
In summary, while Ether faces challenges with price volatility and regulatory uncertainties, the market fundamentals and investor sentiment remain supportive of a potential price rally above $3,400 in the foreseeable future.