Ethereum's 10% Rise After a 7.5% Drop: Is a Supply Shock in Play?
Ethereum experienced a tumultuous period recently, marked by a significant price swing. On March 6th, Ethereum experienced a significant 10% price drop, following in the footsteps of Bitcoin’s volatile price action. While this correction may have dampened short-term sentiment, underlying factors suggest a potential rebound. This followed a drop of 7.5%, leaving many investors wondering what's next for the world's second-largest cryptocurrency.
Understanding the Recent Volatility: Drops and Recovery
Ethereum dropped 10%, struggling to establish $2,700 as support despite whale-backed buying to sustain the uptrend. Several factors contributed to this volatility, including profit-taking and broader market uncertainty. Rising profit-taking among Ethereum holders played a significant role.
Ethereum Supply: Contradictory Signals
The current state of Ethereum's supply presents a complex picture. Ethereum Supply Nearing Two-Year High. Data from CryptoQuant indicates that Ethereum’s supply is currently at 120,501,906, the highest it’s been since February 2025. If this trend continues, downward pressure on price is a concern. This increase contrasts sharply with another crucial metric: Ethereum exchange supply hits historic low: Less than 9 million ETH now sits on exchanges, the lowest in nearly 10 years, as holders move funds into DeFi and staking.
Dencun Upgrade and ETH Burning
Ethereum’s supply increase has been linked to the Dencun upgrade, which reduced ETH fees burning. Experts warn that continued inflation could impact Ethereum’s price negatively if supply continues to increase at the same rate.
The Supply Shock Thesis
Despite the increasing supply, a compelling argument suggests Ethereum is on the brink of a significant supply shock that could drive its price to new highs. A recent analysis by crypto analyst Lark Davis reveals that the Ethereum supply dynamic is complex.
Spot Ethereum ETFs and the Future of Ethereum Price
Ethereum’s price might decline after the initial buzz surrounding spot Ethereum exchange-traded funds (ETF) wears off. The long-term impact of these ETFs on Ethereum's price remains to be seen, but the reduced supply on exchanges suggests strong holder conviction and potential for future price appreciation.