What’s Really Triggering This Epic Ethereum Rally? 3 Key Factors Behind Upsurge

Tony "The Bull" Severino

5 years ago

4 mins read

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The number two crypto asset by market cap, Ethereum, has been outperforming most of the rest of the market over the last few weeks, including Bitcoin.

But what is causing this epic rally? Here are the three most important factors fueling the latest Ethereum bull run.

Three Major Factors Influencing Ethereum’s Latest Bull Rally

Since the start of January, Ethereum has more than doubled in USD value and has risen over 30% against Bitcoin, outperforming the number one cryptocurrency by market cap by a wide margin.

The number two cryptocurrency has also outperformed many other altcoins, including XRP, Litecoin, and thousands more.

But what has been the reason for Ethereum pumping far more so than the rest of the crypto market, Bitcoin and altcoins included?

There are actually a number of reasons for Ethereum’s recent rally, but the three most important factors include the growth in decentralized finance, weak hands being shaken out of the market, and an epic short squeeze that took bearish crypto traders by surprise.

DeFi Growth Causes Spike of Interest in Ethereum

DeFi, or decentralized finance, is a movement to leverage cryptocurrency platforms and their underlying protocols to replace traditional finance with solutions that do not require a third-party intermediary.

The total USD value locked away in decentralized finance applications reached a milestone of $1 billion recently.

The explosive growth in crypto-backed loans and the emergence of the Ethereum-based DAI stablecoin, have increased demand for the Ether token. This surging demand combined with a low available supply due to the next key factor, has caused values to spike over recent weeks.

Ethereum takes the cake when it comes to decentralized finance and centralized finance (cefi) applications as well, with projects like Maker, Compound, and Instadapp. Defi applications on ETH touched a milestone on February 6, when the total value lockedTVL surpassed $1billion pic.twitter.com/rTyZSs7XbI

— Jason (@Jasonvalliere2) February 9, 2020

Early ICO Investors and Weak Hands Fully Shaken Out

While demand is rising for Ethereum, the available supply being sold into the market is diminishing by the day.

Following two full years of drawdown and bear market, Ethereum has reached critically oversold levels.

Not only does this make Ethereum a more attractive buy for long-term investors, but it also means that over the last two years, those who were in profit and interested in selling Ethereum, have already done so, and what’s left is people willing to hold for the long run.

According to data, the aggregated ETH balance of all 8,893 genesis wallets – the very first investors in the Ethereum ICO – have sold off most of their holdings in profit. Those that remain, are likely not interested in selling at current prices if they have failed to do so over the last two years of a selloff.

81% of these wallets only have 1% or left in ETH, suggesting that the supply available to be sold is extremely low.

Aggregated ETH balance of the 8,893 genesis wallets.

Aka the wallets that participated in Ethereum's own ICO. pic.twitter.com/w9i6nP7xl4

— Alex Svanevik 🐧 (@ASvanevik) February 11, 2020

Epic Short Squeeze of Over-Confident Crypto Traders

Finally, while low supply and rising demand caused the initial surge in Ethereum, it’s likely been crypto traders in short positions covering as prices rise, that’s further fueled the parabolic push.

When short trades are closed, it acts as a “buy” of an asset. So as more buy pressure drives up the price of Ethereum, it further forces short traders to close out their positions, increasing the force and momentum of the price movement in what analysts refer to as a short squeeze.

With two years of a bear market, crypto traders have been mentally conditions to always expect more downside, causing them to open short positions at each key resistance level.

But as Ethereum and other crypto assets have pushed through each level with ease, shorts have only piled up further, causing a massive short squeeze and epic rally for the history books.

The only fear is, once the short squeeze has ended, a violent long squeeze could occur in the opposite direction, and with prices reaching parabolic levels, a steep crash cannot be ruled out in the days ahead.

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

Beyond his role at NewsBTC, Tony is the visionary founder of CoinChartist.io, an educational platform aimed at demystifying the nuances of cryptocurrency trading. CoinChartist.io serves as a valuable resource for traders seeking to enhance their technical analysis skills. The platform offers a range of learning tools and resources designed to empower traders with the knowledge to make informed trading decisions.

In addition to his educational initiatives, Tony is a prolific author and a dominant voice in the crypto community. He writes the CoinChartist VIP newsletter, a weekly dispatch that has become a staple among crypto enthusiasts, revered for its insightful analysis and actionable trading advice. This newsletter has consistently ranked as a best-seller on SubStack, boasting thousands of subscribers who rely on Tony’s expertise to guide their trading strategies.

Tony is also celebrated for his literary contributions to the field. He is the author of the highest-rated Crypto Trading Journal on Amazon.com, a testament to his ability to communicate complex trading concepts in an accessible manner. This journal is widely regarded as an essential tool for traders aiming to track their progress and refine their strategies.

Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.