Coinbase has stated that the Ethereum crypto could bring positive surprises in the coming months. According to the report, it is unlikely that the cryptocurrency will be replaced as the center of decentralized finance.
The market may underestimate the timing and likelihood of a possible approval of a US ETF on spot Ether. Let’s see all the details below.
Summary
Coinbase Report: no excess supply for the Ethereum crypto
As anticipated, Ethereum (ETH) has had a lower performance compared to the overall cryptocurrency market this year.
However, its long-term positioning remains solid and could surprise on the upside, according to a research report by Coinbase (COIN) published on Wednesday.
The second cryptocurrency by market capitalization has increased by 29% since the beginning of the year, while its larger rival, Bitcoin (BTC), has recorded a 50% increase.
The CoinDesk 20 (CD20) index, which measures the performance of the cryptocurrency market in general, has risen by 28%.
“Ether could have the potential to surprise on the upside in the coming months”, states the report, highlighting that the cryptocurrency does not have “significant sources of excess on the supply side”, such as token unlocks or selling pressure from miners.
The analyst David Han wrote:
“On the contrary, both staking and layer 2 growth have proven to be significant and increasing sources of liquidity for ETH. In our view, it is unlikely that ETH’s position as the hub of decentralized finance (DeFi) will be replaced, thanks to the widespread adoption of the Ethereum Virtual Machine (EVM) and its layer 2 innovations.”
We remind you that the EVM is the native processing system of the Ethereum blockchain that allows developers to create smart contracts and enables nodes to interact with them.
The layer 2 are separate blockchains built on top of layer 1, or the base layer, that improve scalability and data management.
Coinbase regarding Ethereum ETFs
Furthermore, the importance of potential exchange-traded funds (ETF) on US Ether spot cannot be underestimated, as stated:
“We believe that the market is underestimating the timing and likelihood of a possible approval, which leaves room for upside surprises. Even if the first deadline of May 23, 2024 is rejected, we believe there is a high probability that litigation could overturn that decision.”
Furthermore, in the note it reads:
“Meanwhile, we believe that the structural drivers of ETH demand and technological innovations within its ecosystem will allow it to continue to ride multiple narratives.”
Possible bounce back after the sell-off, according to TradingView
The sell-off of Ether (ETH) seems to have stopped, as bears have encountered strong resistance represented by an upward trend line drawn from the lows of October and January, according to TradingView.
The inability of the bears to break through this trend line since Monday indicates that they may have to retreat, allowing for a price rebound before attempting further declines.
The native token of the Ethereum blockchain has dropped by over 15%, reaching $3,000 from the highs of about $4,100 two months ago, according to CoinDesk data.
During the same period, the CoinDesk 20 (CD20) index, which measures the cryptocurrency market as a whole, lost 17%.
A possible rebound signal for Ether is given by the daily MACD histogram, which has turned positive, indicating a renewed bullish momentum. The MACD is widely used to measure strength and trend changes.
The intraday momentum is constantly improving, with the widely monitored 50-hour simple moving average (SMA) showing an upward trend, providing reassurance.
Immediate resistance is seen in the 50-day SMA, near $3.180, followed by a descending trendline representing the recent correction, currently at $3.225.
