As Ethereum (ETH) stabilizes just above the $3,900 mark, traders are speculating about a potential year-end surge commonly known as a “Santa Rally.” The question remains: Can Ethereum break past its current resistance and deliver significant gains?
Technical Outlook: Ethereum’s Positioning
From a technical standpoint, Ethereum appears promising. The cryptocurrency remains above all major moving averages, maintaining a clear upward trend. However, resistance from early 2024 highs, just above $4,000, continues to limit price movement.
Could Ethereum Reach $5,000 Before 2024 Ends?
Optimism is growing among Ethereum investors as the holiday season approaches. While Polymarket odds assign only a 14% probability of Ethereum hitting $5,000, this could underestimate the likelihood of a strong breakout. Here are three compelling reasons why Ethereum might surge to $5,000 soon.
Reason 1: Positive Market Sentiment
The overall sentiment in the cryptocurrency market is highly optimistic. This is fueled by expectations of a pro-crypto U.S. administration taking office in March. President Donald Trump has pledged support for the crypto industry, with his proposed Treasury Secretary and SEC Chair also showing strong crypto advocacy.
Additionally, Trump’s family reportedly increased their holdings in Ethereum, Aave (AAVE), and Chainlink (LINK). This shift in U.S. policy could mark the beginning of a golden era for cryptocurrencies, driving sustained buying pressure and boosting Ethereum’s price.
Reason 2: Leadership in DeFi and ETF Momentum
While Bitcoin (BTC) is expected to benefit from the establishment of a U.S. Bitcoin reserve, Ethereum might see even greater gains. Ethereum’s dominance in the decentralized finance (DeFi) sector remains unparalleled, holding a 56% market share of total value locked (TVL) despite Solana’s increasing popularity.
Ethereum’s position as the second-most recognized cryptocurrency and its availability in U.S. spot ETFs further strengthen its appeal to new investors. According to data from The Block, ETF inflows into Ethereum have increased since Trump’s election victory, signaling heightened investor interest.
Reason 3: Rising On-Chain Activity
Ethereum’s blockchain activity is experiencing a notable increase. Metrics such as active addresses, transaction counts, and total transfer volume are trending upward, nearing yearly highs, according to Glassnode data. This surge in activity supports Ethereum’s narrative as a deflationary asset.
As more transactions occur, the burning of ETH through gas fees accelerates, reducing supply and potentially driving prices higher.
How Much Higher Can Ethereum Climb?
With Ethereum nearing its all-time high, some investors might fear that the rally’s peak has passed. However, historical patterns suggest otherwise. Like Bitcoin, Ethereum’s price moves in cycles, characterized by aggressive price discovery phases followed by prolonged corrections.
Bitcoin recently entered a new price discovery phase, typically occurring within eight months of its halving. Ethereum historically lags behind Bitcoin by up to two months, indicating a potential breakout in January.
Further supporting this outlook, Ethereum’s realized cap (the market cap based on the last price each coin moved) recently hit a record $248 billion. Additionally, the market cap-to-realized cap ratio is around 1.5, well below the levels of prior market peaks, which exceeded 3.
Can Ethereum Reach $20,000?
While predicting precise price levels is challenging, Ethereum has shown the capacity for significant gains in past cycles. The previous rally saw ETH prices rise over four times their prior record highs. If history repeats itself, Ethereum could potentially climb to $20,000 in the future.
The post Ethereum Price Set to Pump to $5K Before Year’s End? Here’s Why a “Santa Rally” Is Likely appeared first on Cryptonews.
