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3 Reasons Ethereum Price Recovery Remains Elusive Despite Rising Demand

  • Demand for Ether will increase as investors capitalize on the Ethereum price drop to $1,285.
  • The correlation between ETH and Wall Street’s Nasdaq jumped to a four-month high.
  • Ethereum price recovery largely depends on its buyer traffic at $1,300.

Ethereum price is consolidating around $1,350 after bouncing support at $1,300. The new proof-of-stake (PoS) token’s downtrend hit a two-month low of $1,285 last week as investors reacted to the merger on Thursday.

Interest in ETH is on the upside as investors position themselves for an expected bullish trend reversal. On-chain data from Glassnode reveals a sharp increase in the number of addresses with 1,000 and more tokens from 6,174 to 6,472 in May.

In general, spikes in this on-chain metric positively impact the ETH price. However, several fundamental and on-chain factors prevent the Ethereum price from achieving its bullish potential, at least in the foreseeable future.

Ethereum Addresses Chart

Ethereum Addresses Chart

Ethereum price correlation with the Nasdaq index has reached a four-month high

The second largest cryptocurrency recently transformed from one reality (proof-of-work consensus) to another (proof-of-stake), which generated interest among investors. Although the scales tip in favor of ether bulls due to increasing demand, positive price developments are rare.

Analysts believe that growing sensitivity to stocks is holding Ethereum’s price from taking off. According to data from Cumberland, ETH is currently highly correlated with the Nasdaq index. The correlation between the two different asset classes is at 0.580 to 0.765 (four-month high). It is worth mentioning that a value of 0.700 and above is considered a heavy positive correlation between assets.

ETH Nasdaq

“The ETH/NASDAQ [30-day] “The correlation is back to highs for the year — a feature that has overshadowed the weird dynamics of the merger (for now),” Cumberland said Tuesday.

“In the price action space, this level of macroeconomic correlation makes it difficult for crypto-native participants to extract alpha from their edge: a deep understanding of on-chain dynamics,” Cumberland continued.

Cumberland’s insights suggest that the Ethereum price may continue to struggle with the recovery due to the weakness of the Nasdaq. More pain is expected in the stock market after the soon to be released FOMC report (Federal Open Market Committee report).

Ethereum price floats sell signal

After its rejection from around $1,800, Ethereum price nosedived into the descending parallel channel. The support at $1,300 came in handy, preventing the previous loss of the bearish candle wick price of $1,285.

Ethereum may need to establish a break above the price channel to confirm a bullish trend reversal. However, the sell signal presented by the Supertrend indicator continues to dampen buyer efforts.

ETH/USD eight-hour chart

ETH/USD eight-hour chart

As a result, the Moving Average Convergence Divergence (MACD) is a lagging buy signal. Traders looking to go long in ETH should wait for the 12-day exponential moving average (EMA) rather than the 26-day EMA before placing their orders.

Ethereum price faces tight supply zones

The pioneer smart contracts token needs to break above $1,600 to shake off the selling pressure and give way to $2,000. However, IntoTheBlock’s IOMAP model shows that overhead pressure is strong between $1,514 and $1,557. Approximately 749,800 addresses previously purchased 8.35 million ETH in the tier.

Ethereum IOMAP Chart

Ethereum IOMAP model

As bulls drive Ethereum prices higher, investors in the upper zone are likely to consider selling at their breakeven points, resulting in strong headwinds and a possible trend reversal.

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