Ethereum red hot as DeFi theme in spotlight

Ethereum the 2^nd largest cryptocurrency by market capitalization had been knocking on the door of the $1380 overhead resistance for a few days. Yesterday, someone must have lit a firecracker under the price because it absolutely destroyed that resistance and has now gone on to make new highs. There are various reasons as to why we are seeing this explosive price move.

The Wall Street Bets phenomenon has brought the topic of decentralized finance (or as the cool kids call it DeFi) into the spotlight which obviously is a massive selling point for cryptos. The restrictive actions seen over the last few days by brokers to halt the trading of certain stocks has raised important questions about the benefits of moving towards decentralized platforms like Ethereum’s whose blockchain has a big role within that ecosystem. Essentially, those restrictive actions have opened Pandora’s box and I doubt this genie can be put back in the bottle.

Well known digital asset manager, Grayscale Investments has just recently reopened their Ethereum trust to accredited investors again which could be helping create a bid under ETHUSD. Sticking to the institutional theme we have the Chicago Mercantile Exchange due to launch Ethereum futures by February 8^th (as long as all goes smoothly on the regulatory front). This will bring more maturity and liquidity to Ethereum and will allow traders/institutional investors to hedge any spot positions to reduce their risk. The ability to be able to do this makes Ethereum more attractive and allows it to be taken more seriously amongst the large institutions. Speaking of whales, the number of whale addresses (10 000 ETH holding) jumped to a high of 1,103 according to recent data from blockchain analytics firm Glassnode.

Ethereum is also in the process of upgrading its blockchain in an attempt to become a faster, more efficient and scalable platform. The method of the upgrade could also result in lower supply of the tokens – this is bullish as we could see a supply squeeze given a demand catalyst. Also, ‘staking’ has become another organic driver for Ethereum as holders of the cryptocurrency seek to earn a passive income through interest on their holdings. I think we also definitely saw some rotation out of Bitcoin as it lost steam and redirected towards Ethereum in the hopes of higher returns. Fundstrat Global Advisors LLC see it potentially reaching $10 500 eventually. Find out more about our cryptocurrency offering here

On the technical side of things we're seeing strong bullish momentum with price supported by the white uptrend line from late December as well as the pink 21-day EMA. The RSI still has some room to run before it reaches extreme levels of overbought. There is no previous resistance at these levels to work from and the sky is clear blue towards $2000. However, if we do see a pullback the levels to watch are - $1380 and $1275 (white uptrend line, 21-day EMA and previous resistance/support).