The number of short-term Ethereum holders is increasing. Is the next bull market?

Ethereum (ETH) has been showing solid performance recently, leaving investors both ecstatic and wary. The world’s second-largest cryptocurrency, with a market capitalization of nearly $480 billion, recently surpassed the coveted $4,000 mark for the first time since December 2021, sparking numerous bullish predictions. But is this a true resurgence, or are we just witnessing a temporary change before a potential correction?

Let’s analyze the forces at play. Supporters of a continued upward trend point to a combination of positive factors. The approval of the long-awaited US-based Ethereum ETF is a hot topic, with speculation swirling that approval could trigger a significant influx of institutional capital, potentially injecting billions of dollars into the Ethereum ecosystem.

Additionally, the upcoming Bitcoin ​​halving, an event that reduces Bitcoin’s mining rewards by half, is expected to have a positive ripple effect on the entire cryptocurrency market and potentially further develop Ethereum.

The surge in short-term Ethereum holders indicates optimism.

This optimistic outlook is supported by a surge in on-chain activity. Data from IntoTheBlock shows a significant increase in the number of short-term Ethereum holders.

Source: TradingView/IntoTheBlock

Historically, this trend, with the monthly price of ETH surging 60%, is consistent with a bull market, signifying an influx of new users entering the cryptocurrency space and actively participating in the network. Think of it as a party with lots of people. The more people attend (we are currently approaching the high point of the last bull cycle), the more lively the atmosphere will be (and potentially the higher the prices will be).

But there is more to the story. If we take a closer look at technical indicators, the picture is slightly different. Relative Strength Index (RSI) and Chaikin Money Flow (CMF) are currently in overbought territory, with RSI in particular approaching 70.

Total crypto market cap is currently at $2.677 trillion. Chart: TradingView

Simply put, this suggests that the price of Ethereum is thinning out slightly above $4,000, with a potential downside ahead. Imagine a rope jumping competition. If you swing too hard and fast (e.g. RSI above 70) you will eventually fall.

Source: Coingecko

The Future of Ethereum: How to Rebalance

Adding to the curiosity, sentiment among investors appears to be geographically divided. While the ‘Coinbase Premium’, an indicator reflecting buying pressure, is booming in the United States, there is continued selling activity in Korea.

These regional disparities can be attributed to different market dynamics and investor preferences. Perhaps American investors holding green Coinbase premiums are more optimistic about the regulatory environment surrounding cryptocurrencies, while Korean investors holding red Korea premiums are taking a more cautious approach.

So what does all this mean for the future of Ethereum? Unfortunately, the answer is not as clear as we would like. Positive factors such as potential ETF approval, increased network activity due to a surge in short-term holders, and a potential Bitcoin halving boost combine to paint an optimistic picture.

However, the contrast between technical indicators suggesting an overbought market and regional investor sentiment requires caution. Ethereum is currently walking a tightrope. Will it maintain that momentum or face a reality check in the form of a price correction? It’s anyone’s guess.

Featured image from Pixabay, chart from TradingView

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