Why Ethereum Could See Further Rise After Bitcoin Rally Ends
On-chain data suggests that Ethereum is in a better long-term growth position than Bitcoin and thus could see gains even after BTC’s rally is over.
Ethereum Exchange Reserve has not risen that significantly yet
As an analyst in a CryptoQuant post pointed out, investors have been depositing Bitcoin into exchanges recently. The indicator of interest here is the “exchange reserve”, which measures the total amount of a cryptocurrency currently stored in the wallets of all centralized exchanges.
When the value of this metric decreases, it means that the given resource is leaving the exchanges right now. Usually, when prolonged, this trend can be bullish for the price as it suggests that investors may rally.
On the other hand, the indicator’s value going down suggests that the holders are depositing their coins on these platforms. As one of the main reasons investors will transfer their holdings to exchanges is for selling purposes, such a trend could prove bearish for the cryptocurrency’s price.
Now, here is a chart showing the trend of the Bitcoin exchange reserve over the past few weeks:
The value of the metric seems to have been sharply going up in recent days | Source: CryptoQuant
As shown in the graph above, the Bitcoin exchange reserve decreased earlier in the month when the price plunged below the $20,000 level. This suggests that some fresh buying took place at these lows.
However, since the rally restarted, the indicator’s value has also reversed the trend and increased sharply along with the price. This could mean that holders may rush to sell their coins while the opportunity for profit taking remains.
However, it is difficult to say how many deposits are made for this purpose, since the indicator used here measures the reserves of spot platforms (which investors use to sell and buy) and the derivatives exchanges.
Below is another chart, this time for the Ethereum exchange reserve.
Looks like the value of the metric has seen a slight increase recently | Source: CryptoQuant
From the chart, it is clear that, much like Bitcoin, the Ethereum currency reserve fell around the recent lows, and the calculation has also followed an uptrend during the recent price rally.
However, the pace at which the ETH deposits have taken place is different. BTC’s inflow was rapid and the total number of coins flowing in during this surge exceeded the amount withdrawn during the downturns. However, ETH’s currency reserve has grown slowly and is still far from the level before the recent lows.
This may indicate that Ethereum is not yet facing selling pressure of the same intensity as Bitcoin. Because of this, the quant believes that even after the rise in BTC ends, ETH can still be expected to continue to see a strong rise.
ETH price
At the time of writing, Ethereum is trading around $1,800, up 3% in the past week.
ETH has surged during the last few hours | Source: ETHUSD on TradingView
Featured image from Kanchanara at Unsplash.com, Charts from TradingView.com, CryptoQuant.com
