Highlights:
- Ethereum has found strong support at the $3279.5
- A bounce off this level could see Ethereum price rally to $3600 soon
- Trump’s inauguration on January 20 could trigger an Ethereum rally
Ethereum is in the red today, moving in tandem with the price of Bitcoin. At the time of going to press, Ethereum was trading at $3322.83, down by 1.46% in the day. Trading volumes for Ethereum have also dropped in the day by 18.03% to stand at $31.35 billion.
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This is an indicator that bearish sentiment is quite strong for Ethereum at the moment. Ethereum’s price drop is in tandem with the price correction across the market. Today, the total cryptocurrency market cap is down by 2.24% to stand at $3.28 trillion.
Market Corrects as Fears Rise That DOJ Could Offload Bitcoin
The correction that has impacted Ethereum price and other top cryptocurrencies has a lot to do with fears that the US government could be about to offload billions of dollars’ worth of Bitcoin into the market. The latest news hitting the market is that a Federal Judge has allowed the DOJ to dispose of the $6.5 billion it holds of the silk road Bitcoin. This follows close to a year of legal battles between the DOJ and Battle Born Investments.
Maybe we’ll all get the chance to buy Bitcoin at a discount! https://t.co/d16TnQ9SAl
— Nayib Bukele (@nayibbukele) January 9, 2025
Analysts are predicting that if the US government goes ahead and sells the Bitcoin, it could trigger a price correction of between 3 – 7%. This could see most altcoins, including Ethereum face much bigger corrections as has become the norm in the cryptocurrency market. This may explain the selling pressure Ethereum is experiencing at the moment.
Ethereum Price Set for Rebound
However, such selloffs are temporary, and if the DOJ goes ahead and sells Bitcoin, the price could quickly adjust upwards. This happened after Germany sold its Bitcoin, triggering a short-term marketwide correction that was followed by the rally that pushed the market to its recent highs.
Things are even better this time as Donald Trump is taking office in slightly over a week. Since he has promised to create a Bitcoin reserve, the odds are high that his inauguration could be followed by a price rally. This could put top altcoins like Ethereum on a bullish course that could last for the better part of 2025.
Data Shows Crypto Market Still In a Buy Zone
Ethereum could also benefit from the fact that data analytics of the crypto market shows the cycle top is still far away. According to Glassnode, a reputable cryptocurrency market research firm, the cryptocurrency market MVRV (Market Value To Realized Value) is still below 3.2. Values above 3.2 usually imply a price peak, while below it indicates that there is still room for growth.
Despite #Bitcoin's impressive rally last year, MVRV levels above 3.2 – the typical threshold for extreme euphoria – haven’t been reached this cycle. If #BTC were to reach this level, it would correspond to a price of ~$132K: https://t.co/aqPpGPMKgB pic.twitter.com/Vf1Hj9gD9M
— glassnode (@glassnode) January 8, 2025
In essence, despite the recent rally that saw Bitcoin rally to $100k, there is a good chance that Bitcoin and the crypto market as a whole are still undervalued. This is particularly good news for cryptocurrencies like Ethereum that are yet to hit their 2021 all-time highs.
Ethereum Fundamentals Getting Better
Ethereum could also benefit from improving core metrics over time. The platform continues to record strong growth in both the L1 and L2 network levels. Top Ethereum L2s like Arbitrum continue to help Ethereum scale and could attract more Dapps in the future. ETF inflows, which recently hit $12.11 billion, also indicate confidence in Ethereum.
Technical Analysis – Ethereum Price Trading At Critical Support Level
From the charts, Ethereum is currently trading at the $3279.5 weekly support level after days in the red. If bulls take control and there is a bounce off this level, then Ethereum could rally to $3600 in the short term.
On the other hand, if there is a marketwide selloff and Ethereum breaches the $3279.5 support, then a correction to $3058.7 support could follow. With Trump taking office soon and the expectations around his presidency, Ethereum could rebound off the $3279.5 support in the short term.
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