Ether (ETH) is up today, rallying 3% over the last 24 hours to trade at the $3,480 level. Ether’s price is up 16% over the last seven days, mirroring Bitcoin’s (BTC) 21% price increase over the same period.
Ether’s upside momentum can be attributed to Bitcoin reaching a more than 27-month high of $57,000, increasing funding rates, increasing buying in the United States and the upcoming Dencun upgrade.
Let’s look at the factors driving Ether’s rally.
Bitcoin’s rally to $64,000 on Feb. 28 was driven by increased institutional buying as spot Bitcoin ETFs recorded $676 million in inflows, the highest ever since their launch on Jan. 11.
The surge in BTC was accompanied by an increase in the ETH price, which scaled past the $3,500 level to reach an intra-day of $3,521. Ethereum continues to enjoy a close correlation with Bitcoin, at 0.92.
The ongoing rally in both coins is driven primarily by buying pressure in the United States, particularly on the Coinbase exchange.
Data from CryptoQuant, a firm that tracks activity on cryptocurrency exchanges, shows a significant increase in demand for ETH from Coinbase. The “Coinbase premium” reflects this surge, which measures the price difference between ETH/USD pairs on Coinbase and other exchanges.
Essentially, it tracks whether a specific Ether is trading at a premium or a discount on Coinbase in relation to its price on other exchanges.
According to the figure above, the Coinbase Premium Index is in the positive zone explaining the high price volatility experienced on Feb. 28. It suggests that the upward trend for Ethereum may continue in the coming weeks, given the indicator previously signaled price surges in the past.
Data from derivatives market tracker Coinglass shows that ETH funding rate recorded a noticeable spike on Feb. 28, rising as high as 0.0668% within eight hours, the highest since April 2021.
Zooming out, this is nearly 40% higher than the 0.06% funding rate peak recorded in November 2021 in the build-up to Ether’s current all-time high price of $4,800.
This rapid surge in funding rates indicates that traders are highly positive, and investors are getting increasingly greedy as they place highly leveraged bets.
Data from Alternative, a platform that tracks “sentiments and emotions” around cryptocurrencies, shows that the Fear and Greed Index is in the “extreme greed” zone at 82.
This sentiment level is often tricky, as it leaves buyers exposed because when “investors are getting too greedy, that means the market is due for a correction,” according to Alternative. This may lead to substantial losses if prices reverse course, potentially leading to a deeper correction.
Besides Bitcoin’s rally and increased retail interest, Ether’s price action can also be attributed to anticipation around the Dencun upgrade, scheduled for March 13.
The upgrade aims to reduce transaction costs and increase the scalability of the Ethereum network by introducing the concept of proto-dank sharding, which intends to make transaction data temporarily available in a more cost-effective format.
Blobs are coming .oO
Dencun is scheduled for mainnet activation at epoch 29696, occurring March 13 at 13:55 UTC. See the announcement below for client release versions and other useful info about the upgrade https://t.co/9Wa3Y5M5k4— timbeiko.eth ☀️ (@TimBeiko) February 27, 2024
The Dencun upgrade has successfully completed all the testing phases and is ready to be activated on the mainnet. This event has likely fueled anticipation among ETH holders, as the token’s price continues its “up only” trend.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.