Ethereum has risen to around $2,540, approaching a critical level of $2,500, but signs indicate that the market is overheating.
A May 21 analysis by Cryptoquant Contributor Shayanmarkets found that trading volumes have skyrocketed as Ethereum (ETH) approaches this resistance zone. This increase in activity coincides with a surge in short-term profits. If the market is said to be “overheated”, it usually means the price is too fast because of speculation rather than long-term convictions.
In this example, a quick 55% recovery in ETH after a 45% decline in the first quarter increased the likelihood that the rally was about to suspend or reverse. The overheated market suggests potential short-term pullbacks, creating room for fresh accumulation when conditions are stable.
Technical data supports this view. The 69 relative strength index hoveres just below the excess zone, a level that often precedes excessive corrections. Meanwhile, momentum remains positive, with all of the main moving averages from 10 to 200 days heading up. This suggests that even when current price action is stagnant, there is still strong underlying support.
Ethereum price analysis. Credit: crypto.news
If Ethereum cannot beat $2,700, it could retreat to the $2,300-$2,350 range where support is beginning to form. If there are more important modifications, the price can approach $2,100. However, if ETH makes a massive breakout of over $2,700, the rally could continue, especially if there is positive development to back up breakouts.
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Behind the scenes, it appears that large players are positioned for what could come next. On-chain data shows that wallets, a large holder with over 10,000 ETH since late April, have accumulated over 450,000 ETH. Meanwhile, US-based Ethereum Exchange trade funds have seen net inflows of $108 million over the past month, according to SoSovalue data.
At the moment, important catalysts are approaching. By June 1, the Securities and Exchange Commission is expected to make a decision regarding the inclusion of staking into ETH ETFs. By allowing institutions to acquire yields from these regulated products, they can stir up a new wave of demand.
In addition to demand for ETFs, London-based asset manager Abraxas Capital purchased 350,703 ETH, worth around $837 million between May 7th and May 20th.
read more: Arthur Hayes: Bitcoin needs to break past 110K for the alto season to begin.