3 factors that can send Ethereum price to 100% gains in Q4

The market value of Ethereum’s native token Ether (ETH) could double in the next few months thanks to a combination of fundamental and technical indicators.

Ether’s price surged more than 9% to nearly $3,300 on Oct. 1, the first time it had reached that level in 10 days. Its gains were largely due to a price rebound across all top cryptocurrency, including Bitcoin (BTC), that gained 9.5% to reach $48,000, its highest level in 10 consecutive days.

The Ether-Bitcoin correlation to rising U.S. inflation

The Oct. 1 crypto market boom coincided the publication of the United States Commerce Department report on consumer spending.

According to the data, the U.S. core personal expenditures price index (the Federal Reserve’s preferred measure for inflation) rose 0.3% in August, and was up 3.6% year over year. The core inflation reached its highest level in 30 years.

Bitcoin is often seen as a hedge against inflation by speculators, which is why the benchmark cryptocurrency has responded to higher prices in the United States.

According to CryptoWatch data, Ether’s 30-day average relationship with Bitcoin is near 0.89. This resulted in ETH moving in lockstep with BTC.

BTC/USD vs. USD daily price chart. Source: TradingView

The University of Michigan conducted a survey between August 25 and September 27 that found that longer-term inflation expectations among U.S. customers rose to 3%. This is the highest level in a decade.

This result was in direct contrast to the views of Jerome Powell, Federal Reserve Chairman. He had previously described rising inflation as “transitory”, but admitted during a recent Senate hearing the possibility that higher consumer prices could remain unchanged at least until next year.

Inflationary pressures made it possible for crypto bulls to pitch Bitcoin as an ultimate hedge. MicroStrategy CEO Michael Saylor suggested that corporations convert cash-based Treasurys into Bitcoin.

Cash and credit can become obsolete due to rampant inflation. To turn your liabilities into assets, convert your balance sheet to #bitcoin https://t.co/kzCEPDA4S2
— Michael Saylor (@michael_saylor) October 1, 2021

MicroStrategy currently holds approximately 0.5% of total Bitcoin supply, which is worth more than $6 billion.

Supply squeeze

Ethereum received a network upgrade hard fork on Aug. 5. This further raised the bullish outlook of Ether, due to the law of supply-demand.

The London hard fork was the name of the upgrade. It introduced an improvement protocol called EIP-1559 that allowed the burning of a small portion of Ethereum’s network fees, known as the base fee. EIP-1559’s activation, which has been activated, has permanently removed 410.404 ETH (roughly $1.32 billion) from active supply, according to Watch the Burn.

Ethereum is also planning to change its consensus mechanism to be proof-of work (PoW), instead of proof-ofstake (PoS). It has also launched a stake pool, which will allow users to earn rewards as well as grow their Ethereum holdings. Users can lock 32 ETH into the PoS smart contract for a period of time.

The amount of ETH deposited into the Ethereum 2.0 staking agreement has risen from approximately 11,500 in November 2020, to 7.82 millions ETH today. Nevertheless, 7.82 million ETH have been temporarily taken out of circulation by the transition.

Total ETH staked on Ethereum 2.0 smart contract. Source: CryptoQuant

However, total Ether tokens on all crypto exchanges have fallen to new records. CryptoQuant data shows that exchanges hold 18.1 million Ethereum, compared to 23.73 million in a year.

All crypto exchanges have ether reserves Source: CryptoQuant

The falling ETH reserves indicate that traders may prefer to keep their Ether tokens than to sell them for other assets. Investors looking to enter Ether market could face a shortage of Ether tokens, making ETH more valuable.

EIP 1559 #ethereum supply is expected to peak at 120 million. After that, it will continue to drop and then go down. Meanwhile, demand will rise. It is likely that the number will rise.
Lark Davis (@TheCryptoLark), September 24, 2021

Cup and handle

The price of Ether is supported by a combination of lower supply and greater demand. A cup and handle pattern seen on Ether’s longer-timeframe charts provides further evidence of an upside breakout.

Related: Ethereum bears hope to score at Friday’s $340M weekly ETH option expiry

The bullish continuation pattern of the cup and handle, which has a rounding bottom as well as a descending channel configuration, is shown in the chart below. The profit target of the structure is usually at the same length as its maximum height.

Daily price chart for ETH/USD featuring a handle and cup pattern. Source: TradingView

Given that the cup’s resistance is at $4,000, a breakout could see ETH rise to $6,000 or more, nearly twice its current price.

You should research all aspects of trading and investment before making any decisions.

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