Ethereum [ETH] was trading just below the $2,000 psychological resistance level. It has previously traded above this level in May. In recent weeks, repeated attempts to clear this level have been met with rebuttals from the sellers.
On August 4, the U.S. spot ETF Ethereum flows measured $53.75 million in net inflows. If this investor appetite continues, it could help usher ETH back above $2,000.
Developers recently proposed EIP-8361. The draft introduces a mechanism called tapered issuance burn, which would automatically burn a growing share of those rewards as the share of ETH staked increases.
It is still an open draft. While the fundamentals look encouraging, some onchain signals were worth keeping an eye on.
Ethereum metrics do not completely justify a strong scarcity narrative
Market intelligence division Novaque Research observed that the leading altcoin showed “a widening gap between supply restraint and economic demand”.
Factors such as the falling exchange reserves and Coinbase Premium Index, among other metrics, were used to assess perceived scarcity.
Falling exchange reserves point to lower immediately available supply, a trend often associated with accumulation rather than imminent selling. The falling exchange supply could make for an ETH-led crypto market rally.
At the same time, Ethereum staking was growing. Around 41.4 million ETH, or 34% of the supply, has been staked. It highlighted the supply constraint for the altcoin.
Coinbase Premium has been negative since May, showing U.S. investors primarily selling and completely unwilling to pay a premium to buy ETH.
The funding rates were positive, but the 7-day moving average reflected a downward trend over the past month. It was reminiscent of the falling funding rate moving average in March.
As prices climbed higher, the rates briefly turned negative, marking a local top for Ethereum around the $2.4k mark.
A lack of Coinbase premium, combined with a weak base-layer burn, did not generate enough fee pressure to make for a strong scarcity narrative. Higher settlement volume and fees need to be seen to mark a turnaround for ETH, Novaque Research concluded.
The anticipated price action ahead
The $1,847 level, which matched a local high from mid-June, has acted as support over the past two weeks. The lows around $1,500, where the upward impulse move originated from in July, could be a target in case of a pullback.
Final Summary
- The perceived scarcity of Ethereum was based on falling exchange reserves and rising staked volume, but the altcoin also lacked steady demand in recent weeks.
- A short-term pullback toward $1,500 is possible, and $2,000 remained an obstinate supply zone that was not yet flipped to support.
