Ethereum Price Leaps To $2,600 Ahead Of The London Hard Fork

The ETH/USD closed at $2,554.78, after placing a high of $2,696.68 and a low of $2,512.20. The ETH/USD continued its bullish streak for the 12th consecutive session on Sunday, reaching its highest level since June 7, amid the improved market sentiment surrounding the Ethereum network.

Furthermore, the prices of the ETH/USD surged on Sunday, despite the rising prices of the US dollar. The greenback was high on board as the DXY reached the 92.20 level on Friday, gathering its strength back and capping further gains in the ETH/USD. The US dollar was high, as the US Federal Reserve backed traders’ hopes that interest rates will not be hiked anytime soon.

With the London hard fork approaching, the balance of Ethereum on exchanges has been shrinking too. In fact, it has been hitting consecutive lows of late. Towards the beginning of June, the cumulative balance on exchange wallets was well above the 21 million mark. However, within the span of two months, the same has fallen by over 1.5 million.

Additionally, the exchange net flow indicator also highlighted that the outflows have, by and large, been overshadowing the inflows since June. Cumulatively, these two indicators asserted the fact that market participants expect the price of ETH to react positively to the upgrade. Hence, they are buying additional tokens. It also underlined the minimal selling pressure present in the ETH market today.

What’s more, the amount of staked ETH has drastically risen over the past few weeks, and so has the ETH locked in DeFi. What this implies is that ETH tokens being withdrawn from exchanges are not necessarily lying idle, and market participants are playing it safe before the hard fork.

Aside from bitcoin’s price recovery from $30,000, ether may have received a boost from Ethereum’s upcoming 11th backward-incompatible upgrade, or hard fork, slated to happen on Aug. 4.

The London hard fork contains four Ethereum Improvement Proposals (EIP), of which EIP-1559 will activate a mechanism that would burn a portion of fees paid to miners. Once it takes effect, increased network usage will result in a higher amount of ETH being burned, thereby curbing the cryptocurrency’s supply growth over time.

The upgrade may bring ether a store-of-value or deflationary-asset appeal in the eyes of some investors — a narrative so far largely focused on bitcoin. The top cryptocurrency’s supply is capped at 21 million, and its per-block issuance is reduced by 50% every four years.

Under simulations run by Dune Analytics, the upgrade would have burned more than 2.9 million coins in 365 days if implemented a year ago, amounting to over 70% net reduction in supply growth.

“The highly anticipated Ethereum London hard fork event will expose users to a more flexible and cheaper fee structure and introduce a mild burn effect, billed to make ether deflationary,” Greg Waisman, co-founder and COO at the global payment network Mercuryo, said. “The coin has trailed an uptrend from the weekend, and we may see this brewing positive sentiment over the coin shoot its price to $3,000 in the coming days/weeks following the update.”

Is it too early to expect an ATH?

Interestingly, ETH’s MVRV (market-value-to-realized-value) ratio has not dunked below 1 since June 2020. This essentially indicates that investors have been fetching additional returns than usual over the past few months. Whenever this indicator inches towards 3.7, it intensifies the odds of a market top.

The MVRV had breached the same during ETH’s rally earlier this year and also during 2017’s mega bull run.

At press time, the ratio seemed to be heading towards the same level. In less than two weeks’ time (from 20 July to 1 August), the reading on this indicator had inched up from 1.50 to 2.18. If the trend continues at the same pace, Ethereum’s price might soar and make new all-time highs within a period of six weeks from now. Thus, an intensified rally can be expected to begin anytime in the coming weeks.

It should additionally be noted that this ratio has not climbed above 2 very often. Whenever it has managed to do so, however, the MVRV has breached the 3.7 level more often than not. The same has also had a ripple effect on ETH’s price.

Furthermore, the SOPR (spent output profit ratio) highlighted another intriguing trend. This ratio has been fluctuating around 1 since early June. A congruent trend has also been observed twice in the recent past.

During the first instance in 2019 (mid-May to end of July), ETH’s price witnessed a spike of 67% while during the second instance in 2020 (mid-March to mid-July), the alt’s price rallied by close to 112%. A hike of similar magnitudes could see ETH breach the $3500-$5500 level in August-September.

Looking at the state of the aforementioned metrics, it’d be fair to conclude that ETH’s bull run is on. When the aforementioned phase sets in, the alt’s price will most likely end up touching new ATHs.

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