Ethereum’s Sell-Side Liquidity Decline on CEXes: A Catalyst for a $4,000 Surge?

In recent observations made on April 26, an analyst highlighted the increasing likelihood of Ethereum experiencing a surge in the near future due to diminishing sell-side liquidity across major centralized exchanges such as Binance and Coinbase.

#Ethereum sell-side liquidity is very thin on centralized exchanges.

It doesn’t need a lot of demand to push the #ETH price much higher from here.

Bullish. pic.twitter.com/CFVyfUTKt1

— Leon Waidmann | On-Chain Insights🔍 (@LeonWaidmann) April 25, 2024

Declining Sell-Side Liquidity and Ethereum’s Potential Upswing

The decrease in sell-side liquidity, evident in the order books of centralized exchanges (CEXes), signifies a reduction in the number of sellers willing to offload their Ethereum holdings. With a scarcity of sellers in the market, even a slight uptick in demand could potentially trigger a significant price surge.

Nevertheless, this imbalance could be addressed by market makers who understand the dynamics of the market. However, it’s important to note that price rallies are not guaranteed even in the current circumstances.

Unlike emerging meme coins, Ethereum boasts considerable liquidity as the second-largest cryptocurrency by market capitalization, trailing only behind Bitcoin. Consequently, a substantial influx of capital would be required to breach the immediate resistance levels at $3,300 and $3,700, as depicted in the daily chart.

Ethereum has faced downward pressure throughout April following a retreat from its all-time high of $4,090. Analysis of the daily chart indicates a 23% decline from the peak, with significant resistance encountered around the middle Bollinger Band, or the 20-day moving average.

Analysts anticipate a reversal of mid-April losses once a decisive breakout above $3,300 is accompanied by an increase in trading volume. Failure to achieve this could result in Ethereum dropping below $2,800, coinciding with the sell-off witnessed on April 12 and 13.

Spot Ethereum ETF Launch in Hong Kong Sparks Optimism

Despite the recent challenges, traders maintain a bullish outlook, foreseeing a potential price rebound in the coming months. Several factors could contribute to an upward trajectory in Ethereum’s price, with a notable catalyst being the impending launch of spot Ethereum exchange-traded funds (ETFs) in Hong Kong. Similar to the impact of spot Bitcoin ETFs on BTC prices, this development could provide a boost to Ethereum by enabling traditional investors to access the cryptocurrency.

In the United States, regulatory uncertainty surrounding Ethereum’s classification remains a major obstacle to the approval of similar products. On April 25, ConsenSys filed a lawsuit against the Securities and Exchange Commission (SEC), urging the regulator to classify Ethereum as a commodity.

Looking beyond the launch of ETFs, Ethereum’s fundamental strengths continue to underpin optimism. The ongoing adoption of Ethereum and the implementation of Layer 2 scaling solutions further enhance the platform’s long-term prospects for growth and sustainability.

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