Despite the largely negative sentiment surrounding Ethereum ahead of the Shanghai Upgrade, ETH has traded above $1,700 for ten consecutive days. Will the current gloomy social sentiment encourage crypto investors to pile in ahead of the Shanghai Upgrade?
Potential Fed rate cuts could sustain the spike in decentralized finance (DeFi) activities on the Ethereum smart contract network.
DeFi Boom Could Propel Ethereum Despite Shanghai Upgrade Uncertainty
Ethereum (ETH) has attracted new demand as crypto investors continue to move their funds into various DeFi protocols built on the Ethereum network. In addition to the decline in bank deposits, rumors of rate cuts and further dollar printing by the US Federal Reserve (Fed) have also contributed to the recent DeFi boom.
The recent spike in DeFi activity signals a prolonged Ethereum price rally, despite widespread uncertainty surrounding the upcoming Shangai upgrade.
There has been a persistent increase in the supply of Ethereum in DeFi smart contracts since March 13, according to Glassnode.
Since March 13, the supply of Ethereum in smart contracts grew by nearly 500,000 ETH (0.4% of total ETH supply in circulation), worth approximately $832 million, as of March 27.
When there is an increase in the volume of tokens locked in smart contracts, it temporarily reduces the units in circulation. The relative scarcity caused by the recent DeFi boom could power Ethereum into further price gains.
Furthermore, as the scheduled Shanghai Upgrade approaches, the social sentiment surrounding Ethereum has taken a downturn in recent weeks. According to Santiment, Ethereum’s weighted sentiment has remained negative since March 13.
As depicted by the red line below, Weighted sentiment trended downward from a marginally positive value of 0.018 to a negative value of -0.24 between March 13 and March 27.
Weighted sentiment compares the ratio of negative mentions of assets to the positives. Low values mean the social sentiment surrounding Ethereum is largely negative. Notably, crypto investors could consider this perfect timing to enter the market.
In summary, if the DeFi boom continues in its upward trajectory, the dysphoric perception could encourage investors to pile on buy pressure in the coming weeks.
ETH Price Prediction: $2,500 is Within Reach
Ethereum is likely to clear $2,500 soon, according to IntoTheBlock’s Global In/Out of Money (GIOM) data. As seen below, if ETH can break its current resistance set around $1,800, it will face minimal resistance until it approaches $1,900.
Around $1,900, there are 3 million addresses that may look to sell some of their 3.19 million ETH holdings. However, if ETH enters a prolonged rally, $2,500 could be the next major resistance. At the $2,500 zone, the 8 million addresses had purchased more than 26 million coins and could look to take some profit.
Still, the bears could seize the initiative if the price of Ethereum slips below $1,600. At the $1,600 region, the 6.4 million addresses that bought 9.4 million ETH could offer considerable support.
But if that support cannot stop the slump, ETH may head toward $1,400. The average price that 6.3 million addresses had purchased about 14.5 million ETH coins.
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