Ethereum price rose above $2,500 on January 15, further extending its post-ETF approval lead over BTC. On-chain data trends provide important insights into the underlying drivers.
“Buy the rumor, sell the news” is a popular trading strategy in which speculators make acquisitions before a major news event in the hopes of selling for a profit if the news is confirmed. BTC speculators used this trading strategy to make historic profits ahead of the spot approval ruling for the Bitcoin ETF. Key on-chain data trends now show that Ethereum (ETH) is also beginning to show signs of a similar phenomenon.
BTC Speculators Made a 97% Profit Ahead of ETF Approval
Bitcoin spot ETF approval efforts have suffered several setbacks recently, with the US Securities and Exchange Commission (SEC) citing market manipulation, oversight and liquidity concerns.
However, things took a turn for the better on June 15, 2023, when BlackRock (NASDAQ: BLK) officially filed with the SEC for a spot Bitcoin ETF. With over $13 trillion in assets under management (AUM), BlackRock is one of the largest asset management firms in the world.
BlackRock's intervention has fueled optimism around Bitcoin derivatives and effectively sent the rumor mill into a frenzy.
On June 15, Blackrock's official filing date, the price of Bitcoin was around $24,800. Within the first two weeks, speculators who picked up on the rumor early sent the Bitcoin price up 25%, reaching $30,000 for the first time in 12 months since June 2022.
Bitcoin (BTC) Price Action Ahead of ETF Approval June 2023 – January 15, 2024 | Source: TradingView
Between June 15 and January 11, when the SEC finally confirmed the news, the price of Bitcoin almost doubled, rising from $24,800 to a local high of $48,890. This resulted in speculators who bought the rumor following BlackRock's filing making a 97% profit.
Unsurprisingly, the wave of profit-taking that followed the SEC approval sent BTC price up 15% toward $42,500 on January 15. News cycle on site Bitcoin ETF narrative.
With the Bitcoin ETF now over, investors have shifted their focus to Ethereum. BlackRock filed for a spot ETF for Ethereum on November 16th. In a recent interview on January 12, BlackRock CEO Larry Fink reiterated the value of an Ethereum spot ETF as an asset class.
While BTC price has fallen by 3.8%, Ethereum has risen by 13.5% in the past week. In fact, ETH price has outperformed BTC by around 10%.
Ethereum (ETH) vs. Bitcoin (BTC) Price History – January 9 – January 15, 2024. Source: Coin360
Interestingly, in addition to this different interplay between ETH and BTC price movements over the past week, strategic on-chain movements by Ethereum whales since January 11th also confirm early signals for the Buy the Rumor strategy, pointing to the ETH markets.
Ethereum whales have purchased $1.4 billion worth of ETH since the Bitcoin ETF approval ruling
According to Coin360 data, Ethereum price has outperformed BTC by 10% on paper over the past week. Looking beyond the price charts, a key on-chain indicator has shown that ETH's performance was boosted by corporates and wealthy investors who increased their buying pressure shortly after the Bitcoin ETF approval verdict.
Santiment's Supply Held by Top Addresses metric shows a real-time snapshot of the total balances currently controlled by the largest wallets in a crypto ecosystem.
The latest metrics show that the top 1,000 Ethereum wallets held only 66 million ETH in cumulative balances as of January 10th.
But since the focus shifted to the Ethereum spot ETF, strategic ETH investors have embarked on a buying spree, adding 570,000 ETH, bringing their balance to 66.5 million ETH as of press time on January 15th.
Ethereum (ETH) supply is held by top addresses | Source: Santiment
At the current price of $2,540, Ethereum's Top Holder Supply table above shows that the top 1,000 investors added $1.4 billion worth of ETH coins to their holdings in the last four days alone added.
When the largest stakeholders quickly increase their balances by hundreds of millions, it is intuitively interpreted as a strong bullish signal. First, the buying trend among the largest stakeholders increases overall confidence in the cryptocurrency ecosystem.
Given that large holders often hold longer than small farmer swing traders, this accumulation puts ETH in a prime position to post historic gains in the coming weeks.
Ethereum Market Dominance Rises After Spot Bitcoin ETF Approval | Source: TradingView
More importantly, the timing of the recent buying spree suggests that investors are buying the rumor with optimism that Bitcoin's ETF approval will increase the likelihood that ongoing ETH applications will also receive a positive SEC ruling.
The Ethereum Dominance (ETH.D) chart further confirms this stance. Ethereum gained 14% more market share between January 10th and 15th, while Bitcoin price fell by an almost identical 15%.
This suggests that speculative traders are selling the BTC news and quickly buying up the rumor ahead of a possible preliminary verdict on ETH ETF approval.
ETH Price Prediction: Can Ethereum Reach $5,000 in 2024?
From the data points analyzed above, the accumulation of large holder wallets and increasing ETH dominance indicate that the “buy the rumor” strategy is now widespread in the Ethereum markets.
Given that Bitcoin had posted a 97% gain ahead of the spot ETF approval ruling, a similar performance could see ETH reach $5,000 in the event of a positive outcome.
However, in the short term, ETH bulls need to overcome the $2,900 resistance to maintain the momentum. IntoTheBlock's Global In/Out of the Money chart, which highlights potential support/resistance points based on the historical entry prices of current ETH holders, also supports this ETH prediction
It shows that 91% of all ETH holders are now in a winning position as ETH prices are currently above $2,500. With the ETH ETF approval process at the forefront, these holders may increasingly become less willing to sell.
However, the 8.5 million Ethereum holders who purchased 4.1 million ETH coins could face significant resistance in booking early profits as prices approach their break-even point.
Ethereum (ETH) Price Prediction | Jan 2024 | Source: IntoTheBlock
The bears could nullify this bullish forecast if ETH price unexpectedly falls below $2,000. However, 7.9 million investors purchased 43.4 million ETH at the highest price of $2,039.
Considering that this is the largest group of current ETH holders, they will likely have enough in the tank to overcome this bearish pressure.
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