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Joel Frank
Author
Joel Frank
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As the Ethereum (ETH) price consolidates just above $3,900, traders are eyeing the possibility of a surge into the year’s end, a phenomenon referred to as a “Santa Rally”.
From a technical perspective, Ethereum is looking good right now, sitting above all of its major moving averages and still in a clear uptrend.
However, resistance in the form of the early 2024 highs just above $4,000 continues to cap the Ethereum price action.
However, Christmas could be about to come early for Ethereum investors.
While Polymarket betting odds only currently place a 14% chance that the Ethereum price will hit new all-time highs at $5,000, this may represent the market under-pricing the likelihood of a strong breakout. Here’s why.
Ethereum Price to Pump to $5,000 Soon? Here’s Why That’s Likely
Reason 1 – Vibes
To say that vibes are good in the crypto market right now would be an understatement ahead of the arrival of an almost unimaginably pro-crypto incoming US administration in March.
Trump promised this week to do great things for the crypto industry, his picks for Treasury Secretary and SEC Chair are ardently pro-crypto, and his family were spotted loading up their ETH, AAVE and LINK positions just days ago.
Its not hyperbole to say we are not he cusp of a new golden age for crypto markets as policy in the US swings decisively in a positive direction.
That is a strong reason why buy pressure is likely to remain elevated into the year’s end, boding well for the Ethereum price.
Reason 2 – Market Leadership and ETF Inflows
The prospect of the establishment of a national Bitcoin reserve in the USA suggests that Bitcoin (BTC) will be a massive winner amid the upcoming administration.
However, altcoins like Ethereum which have been weighed so heavily by regulatory uncertainty in recent years may enjoy an even greater snapback.
And Ethereum is in a great position to be one of the strongest-performing altcoins. It remains far and away the most dominant blockchain in DeFi, with a 56% market share of TVL per DeFi Llama, even if Solana has overtaken it in terms of speculative trading activities (thanks to its lower fees).
For investors new to crypto looking to expand beyond BTC, Ethereum will likely stand out as the obvious next option.
That is even more the case given Ethereum is the only other major crypto to have spot ETFs in the US.
According to data presented by The Block, Ethereum ETF inflows have been ramping up since Trump’s election victory.
And there is no reason for this to slow down into the year’s end, meaning upside risks to the Ethereum price in the coming weeks.
Reason 3 – On-chain Activity Heating Up
Another reason to be bullish on the Ethereum price into the year’s end is because the activity on its blockchain is really starting to heat up.
Per Glassnode’s Ethereum core on-chain dashboard, metrics such as number of active addresses, number of transactions, and total transfer volume are all trending higher and challenging yearly highs.
That strengthens the adoption narrative and can help to support prices. But it also contributes to the narrative of Ethereum as a deflationary asset – a portion of the ETH gas fees get burnt, so the more fees are generated, the more ETH is burnt.
How Much Higher Can Ethereum Go?
With Ethereum now close to its record highs, investors would be forgiven for fearing that the best part of the rally might now be over.
But that would be a mistake – Just like Bitcoin, the Ethereum price has historically moved in cycles, breaking into phases of aggressive price discovery, followed by large and prolonged drawdowns.
Luckily for the bulls, a new phase of price discovery is likely just around the corner. Bitcoin entered its new phase of price discovery last month, as it historically always have within eight months of the BTC halving.
Ethereum, meanwhile, has historically lagged Bitcoin by up to two months. That could mean an aggressive breakout to fresh record levels is coming in January.
Various on-chain metrics also support the thesis that the top isn’t yet in – Ethereum’s “realized cap” (i.e. the market cap at the average price when each last coin moved) just hit new record highs at just under $248 billion.
And the ratio of the ETH market cap to its realized cap, last around 1.5 per Glassnode, remains well below levels that have marked prior market peaks (above 3).
Meanwhile, while high, the profitability of the Ethereum market also remains below levels that have marked prior Ethereum price peaks. Per Glassnode, NUPL was last just over 0.5, but prior market peaks have seen NUPL rise above 0.75.
Regarding the question “how much higher can Ethereum go?”, no one knows for sure. But the answer is certainly a lot.
The past cycle saw the Ethereum price rally over 4x beyond its prior record highs. A repeat of these gains is very possible, setting up the possibility of a near $20,000 Ethereum price.
