Ethereum Liquidity Crisis Could See The New ETH All-Time High Before Bitcoin

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The valuation of Ethereum has been on a steady increase since the cryptocurrency market started its resurgence in late July. The Ethereum price has seen the altcoin reach a stable price, not falling below $3,000 support price on major exchanges such as Binance, Redot, and crypto.com. This new stability, while commendable, is only but the starting point of the recent highs that Ethereum is about to reach, market analysts predict.

Increasing demands for specific cryptocurrencies, increase in reserve, hard forks, supply shocks, and halving are some reasons why cryptocurrencies hit all-time highs in price. And Ethereum looks more than set for an all-time high in its price.

Bitcoin ETF

Bitcoin, the most popular cryptocurrency, has been the benchmark for all the other cryptocurrencies, altcoins. Bitcoin is like the big brother that every other cryptocurrency looks up to for support. Although it has not been increasing as much as other new altcoins, the price of bitcoin has been on the rise since the market retook shape after the slump in late May.

However, the stats show that we will see an Ethereum all-time high before seeing an all-time bitcoin high.

And why do the analysts predict that Ethereum’s price will reach an all-time high before Bitcoin? A plethora of reasons exist.

However, before we explain the liquidity shortfalls in Ethereum, let us delve into the market trends so far to understand the latest happenings.

Ethereum  Maintaining The $3000 Price

Although the price of bitcoin rose in late July by about 50%, rising from the ashes of its $29,000 price, Ethereum has shown better potentials of reaching its all-time high price before bitcoin.

The market’s resurgence, which saw bitcoin hit the $50,000 mark, hasn’t stopped the cryptocurrency from suffering price slumps over the last few months.

The exciting thing about the price of bitcoin is that, while the price has fought back, it hasn’t gained as much price support as Ethereum has. The cost of bitcoin, aside from being far from its all-time high, has seen a high level of volatility, while Ethereum has found great support in the $3,000 price mark.

When there is a high level of price volatility, a cryptocurrency’s price will find it hard to reach new highs because traders are careful. People are unsure of the cost, therefore somewhat stagnating the price of bitcoin.

The stability that Ethereum has gained at the $3,000 price mark means more traders are confident in its price and are willing to pay more.

Ethereum Liquidity Shortfall Intensifying

A cryptocurrency’s liquidity, in plain terms, means that the currency is fungible, and can be converted into cash quickly. So, when cryptocurrency liquidity is in shortfall, it means the cryptocurrency value is increasing, and investors and traders are choosing to hold for the longer term.

For Ethereum, the liquidity levels are in a shortfall for different reasons. According to statements credited to Ki Young Ju, the CEO of on-chain analytics service CryptoQuant, if you want to buy Ethereum, you have to buy now because there is a sell-side liquidity crisis in Ethereum.

The different reasons why there will be an all-time high price for Ethereum faster than there will be for bitcoin are:

  1. THE RECENT LONDON HARD FORK: A hard fork is like a network upgrade. In a hard fork, the nodes of the new chain don’t accept the old version of the blockchain.

For example, it is like an upgrade in software. When there is a software upgrade on the phone, the phone will not use applications that run on old software. Now, only applications designed with new software can work on the phone.

The Ethereum hard fork led to a liquidity shortfall, which will invariably increase the price.

  1. INCREASING ETHEREUM RESERVES AND DECREASING BITCOIN RESERVE: The amount of bitcoin exchange has in its reserve is a strong indication of bitcoin’s demand and supply pattern.

A reserve is the amount of bitcoin in an exchange’s wallet.

A steady decline in bitcoin reserves since May saw a boost in July with over 2.5 million bitcoins. However, the Ethereum reserve has declined since May and hasn’t increased since then. The Ethereum reserve was 19.25 million in August, a sharp decline from the 21.43 million Ethereum held in May.

This decrease in reserve, opined Ki, will leadeth to an all-time high faster than BTC. Ethereum hit an all-time high price of $4,000 in May and has maintained the $3,000 price support.

  1. SUPPLY SHOCKS BATTLES: A recent Metricon Cointelegraph revealed that there would be supply shocks in Ethereum and bitcoin, warning traders and investors to hold their cryptocurrencies.

In the case of Ethereum, the supply shock ratio has been impressive, with many investors predicting that there will be an increase in the demand for Ethereum.

Before exploring how supply shocks affect the price of cryptocurrencies, especially Ethereum, it is essential first to understand what a supply shock means.

What is supply Shock?

A supply shock is when the demand for a crypto asset is more than the number of assets that can be issued. This means more people want the asset, but the rate at which the asset, in this case, cryptocurrency, has been produced is slower, leading to a low supply.

The predictions, according to a Bloomberg Intelligence report, is that there will be flippening.

Flippening is a colloquial term in the cryptocurrency space that was coined in 2017. It refers to the market capitalization of Ethereum surpassing that of bitcoin. If there is flippening and a massive one, Ethereum will become the most prominent cryptocurrency.

With the decrease of bitcoin’s usage to 47.7%, there are signs that Ethereum might soon become the most prominent cryptocurrency in the world. Plus the growth of NFTs, many of which are built on Ethereum, the all-time high price of Ethereum will not only overtake bitcoin’s all-time high price, Ethereum will become the most used cryptocurrency in the world.

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