Ether retakes $3K amid signs of seller exhaustion before ETF debut

• Ether rose past $3,000 during European trading hours.

• Discounts in the Grayscale Ethereum Trust and the Coinbase indicator have evaporated.

• Price charts show seller exhaustion near the long-held support at $2,800.

After falling nearly 20% in the four weeks to July 5, the ether (ETH) market finally shows signs of seller exhaustion and a potential bullish turnaround.

Early Monday, the native token of the Ethereum blockchain rose over 4% to $3,050, bouncing off crucial support, according to CoinDesk data.

The recovery, coupled with other indicators gauging demand and investment sentiment, suggests the cryptocurrency may have bottomed out ahead of the impending debut of spot ether ETFs in the U.S. this month.

Coinbase and Grayscale discounts evaporate

Ether is no longer trading at a discount on the Nasdaq-listed Coinbase compared to Binance, a sign of seller exhaustion and potential price bottom.

Blockchain analytics firm CryptoQuant's ether premium index, which measures the gap between Coinbase's ETH/USD pair and Binance's ETH/USDT pair, has bounced to zero or neutral from the deep discount of -0.19 at the end of June. The erstwhile discount represented strong selling pressure from the stateside investors.

Ether is no longer trading at a discount on Coinbase. (CryptoQuant).

Similarly, the discount to net asset value (NAV) for the Grayscale Ethereum Trust (ETHE) has silently evaporated for the first time in over two years in a sign of increased investor confidence and demand for ether-related investments, according to data source Grayscale and YCharts.

"The discount had been narrowing since the crypto bear market bottom in December 2022 and, in particular, more recently with the SEC's approval of 19b-4 forms for spot Ethereum ETFs from various issuers on May 23, 2024," Tagus Capital said in an email.

Although the issuers still need to have their S-1 registration statements become effective before trading can start, the elimination of the NAV discount indicates expectations of impending SEC approval for Ethereum ETF trading, potentially around mid-July," Tagus Capital added.

Discount in the Grayscale Ethereum Trust. (Grayscale, YCharts) (Grayscale, YCharts)

According to several observers, the ETFs will likely unlock billions in investor demand for ether and boost awareness of its parent blockchain, Ethereum, which is usually considered more complicated than Bitcoin.

"Analysts have predicted that the potential demand for the ETH ETF will result in inflows around 30% of those experienced during the BTC ETF introduction. During the first five months, the BTC ETF experienced $5 billion in net inflows," analysts at IntoTheBlock said in the weekly newsletter.

Sellers fail to penetrate key support

Price recoveries are typical during bearish trends, but ether's move above $3,000 stands out because it has followed a successful defense of crucial support zone of $2,800-$2,850.

Buyers defended those levels through the second half of April and early May, establishing it as crucial support. The fact that long-tailed daily candles have emerged at the said support since Friday suggests sellers have run out of steam.

Long-tailed candles at key support suggests seller exhaustion. (CoinDesk/TradingView) (CoinDesk/TradingView)

A long-tailed candle shows that sellers were initially in control, driving the price down to the support, but were eventually overpowered by buyers. Hence, potential exists that the recovery will keep going in the near future.

Another sign of reassurance for the bulls is the presence of the double bottom pattern on the hourly chart. The pattern found at the end of a downtrend, resembling the letter "W," indicates decreased selling momentum and a potential bullish turnaround. The fact that prices have tested and found support at the same level twice suggests sellers are struggling.

The presence of W-shaped double-bottom pattern suggests potential trend reversal higher. (CoinDesk/TradingView) (CoinDesk/TradingView)