What’s Stopping Ethereum From Producing a God Candle to $5,000?

Ethereum, the second-largest cryptocurrency by market capitalization, has been long-anticipated by crypto investors to surpass the $5000 psychological level. However, despite the launch of spot ETFs (Exchange-Traded Funds), which drove Bitcoin to new highs, Ethereum’s price has struggled to sustain a directional rally. Here’s what is stopping Ethereum price from producing a ‘God candle’ to the $5k mark.

Spot Ethereum ETFs Struggle to Attract Investor Interest

Unlink Bitcoin, the spot Ethereum ETFs, has struggled to gather the investor’s interest and capital since debuting on July 23rd. Since then, the Ethereum price has been trending down and plunged 23% to now stabilize above the $2200 level.

Yesterday, the spot ETH ETF recorded a modest inflow of $3.06 million, maintaining similarly low inflows throughout the week. 

In May, the senior ETF analyst of Bloomberg, Eric Balchunas, mentioned, “One of the challenges for Ether ETFs in penetrating the 60/40 Boomer world is distilling its purpose/value into an easy-to-understand sound bite a la “bitcoin is digital gold.”

PlusToken’s ETH Stash Sale Triggers Market Concerns

The PlusToken scheme, one of the largest fraudulent cryptocurrency Ponzi operations, operated in China from 2018 to 2019. When authorities shut it down, they seized about 194,000 BTC and 830,000 ETH from the scam leaders.
While the majority of Bitcoin was liquidated, Ethereum coins remained untouched.

According to OTC Research, the Chinese government started selling the remaining 542k ETH, valued at approximately $1.3 billion. In the last 24 hours, 15.7k ETH was transferred to an unknown address, while 7k ETH was shifted to exchange, triggering the speculation of potential selling.

In early August, the remnants of ETH seized from the multibillion dollar PlusToken scheme awoke on-chain for the first time since 2021.

Over the last 24h about 7k ETH of the remaining 542k ETH ($1.3b) was sent to exchanges indicating intent to begin selling the remaining tokens. pic.twitter.com/tu2o7y4o4L

— ∴FreeSamourai∴ (@ErgoBTC) October 9, 2024

These large transactions could delay the ETH rally to $5000.

Ether Issuance Rate Hits 2-Year High Amid L2 Growth

According to SatoshClub, the Ethereum issuance rate hit 0.74% in September, its value in a 2-year. This increase in supply suggests that the network is facing a higher rate of inflation than it has in recent months.

The deflationary path Ethereum followed using fee-burn has been significantly impacted due to the increasing usage of Layer-2 (L2) solutions after the Decun upgrade. L2 networks, like Arbitrum and Optimism, offer cheap transaction fees, drawing activity away from Ethereum’s mainnet and resulting in a decline in burning activity.

With more ETH being issued and Ethereum’s deflationary mechanism underperforming, the increasing supply will exert downward pressure on coin price.

$ETH‘s issuance rate hit ~0.74% in September, marking a 2-year high.

The path to deflation might depend on boosting mainnet activity as users flock to cheaper L2 solutions. pic.twitter.com/DFncZl7264

— Satoshi Club (@esatoshiclub) October 11, 2024

Analyst Prediction Short Pullback Before ETH Price Rally

A recent chart analysis by the crypto trade Inmortal shows short-term and long-term perspectives on the price of Ethereum. The attached chart shows that the ETH price could extend the current correction trend by 13% to hit the multi-month support of $2104.

While the analyst also highlights a possible fake breakdown from $2104, the buyers could recuperate the bullish momentum at this support for a major leap. The post-reversal rally could push the asset to a high of $4200.

On the contrary note, the Ethereum price prediction would enter a major correction if buyers are unable to sustain $2000.