Ethereum has once again taken center stage as the crypto market gains momentum.
With a stunning 44.8% increase in just the past week, ETH is not only outperforming many of its peers but is also becoming a focal point for traders, institutions, and analysts as the next major asset likely to break out. The second-largest cryptocurrency by market capitalization is signaling its readiness to lead this bull cycle.
Even amid a marked drop on May 12, when total outflows from its spot ETF products reached $17.59 million, Ethereum’s on-chain and price action data point to some really strong underlying momentum. There’s no question smart money is accumulating, and Ethereum has reached a point where any further speculative positioning has stretched to the limit. So, with all this in mind, can Ethereum push through the next set of critical resistance levels and kick off the next leg up in its rally?
Ethereum’s Momentum Builds on Short Squeeze Dynamics
Ethereum’s current price action has one of the most compelling signals backing it: it is the top asset with the highest short interest among on-chain analytics major cryptocurrencies. This extreme level of short positioning created the conditions for a sudden upward jolt: a 10% breakout last week that snowballed into a 30%+ rally.
Such rapid moves are often driven by short squeezes, when bearish traders have to cover their positions by buying back ETH at much higher prices than they sold it for, thus propelling the asset further upwards. Some analysts suggest that if Ethereum were to clear the key psychological and technical resistance level of $2,800, it could trigger a second phase of the short squeeze with even more intensity, pushing the asset closer to the highs it reached in the middle of 2021.
Ethereum is currently present behaving as a classic short squeeze but with many upward moves of significant size. Ordinarily, a heavily shorted asset would be expected to rally up only so far before a look-to-sell area where bear market traders can engage and bring the price down again. Yet, throughout much of this year, both market structure and key technical indicators have been favoring the bulls. That is especially the case with these two trades in particular.
Institutional Accumulation Signals Long-Term Confidence
In the context of soaring prices and speculative intrigue, Ethereum is drawing serious attention from institutional investors. Although May 12 saw Ethereum spot ETFs experience a net outflow of $17.59 million, the overall appearance of this asset implies that “smart money” is in the process of achieving long-term, direct exposure to ETH.
This trend of accumulation is supported by wallets that show consistent inflows into those historically associated with institutional trading desks and custodians. These movements typically occur before public ETF data catches up. This suggests that the outflows that seem to be occurring in ETFs at this time may just be temporary noise in a much more bullish narrative that’s forming behind the scenes.
The price of ETH and speculation about its future value are not the main aspects driving institutions to consider Ethereum. What is driving institutional interest in Ethereum is the utility offered by ETH and the Ethereum network within the evolving landscape of Web3, which seems to offer a way of doing things on the internet that is more secure, private, and censorship-resistant than Web2.
This interest is better reflected in a range of use cases from DeFi to NFTs, staking, and now a range of enterprise blockchain use cases. At the same time, these use cases are helping to establish Ethereum as one of the internet’s basic infrastructures. Why is this happening?
Altcoins Ride the Wave as Ethereum Leads the Pack
The renewed impulse of Ethereum has reached the rest of the market as well. Altcoins are showing renewed strength, with quite a few projects posting some massive weekly gains. Leading these gains is $MOG from @MogCoin, which has seen an extraordinarily high price increase of 109.7% in the last week. Following not too far behind are:
$PEPE (+75.3%)
$FLOKI (+50.1%)
$ARB (+46.0%)
Speculative investment appetite seems to be back on the scene.
Among the other top performers are $GALA (44.0%), $ENA (43.6%), $INJ (42.4%), and even Ethereum itself with a 40% gain. Rounding out the top ten are $UNI and $NEAR, with gains of 39.3% and 35.7%, respectively. These figures highlight a reinvigorated market in which investors seem less risk-averse and are instead moving capital into high-beta assets and smaller-cap tokens. Once again, confidence appears to be returning.
The renewed momentum of altcoins spotlights Ethereum’s as the bellwether of the crypto market. When Ethereum leads a rally, other tokens almost always follow suit. This is especially true for tokens built on or closely tied to the Ethereum network.
Despite unseasonably cold weather in the part of the crypto world that is NFT and DeFi, a rebound is on the way. Meanwhile, Layer 2 networks are gaining adoption.
Ethereum is not just rising in price. The second-largest cryptocurrency by market capitalization is also asserting itself as a leader in the overall crypto market. For a long time, Bitcoin has been the undisputed ruler of the crypto kingdom. But now, Ethereum is moving away from being seen as just a glorified altcoin and is, instead, starting to be seen as a structural part of this new landscape the crypto market is finding itself in.
Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.
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