Ethereum Surges 20% in 24 Hours: What’s Driving the Rally?

Ethereum has experienced a significant surge, climbing 20% in the past 24 hours and trading at $2,209 at the time of writing. This marks one of its sharpest short-term moves this year, fueled by increased trading activity and renewed investor interest.

Key Drivers Behind Ethereum’s Rally

Increased Trading Activity in Derivatives Markets

The spike in Ethereum’s price is closely tied to a sharp rise in activity within the derivatives market. Trading volumes in Ethereum futures soared by 184%, and open interest increased by 20% over the same period. Rising open interest, coupled with price gains, often signals the entry of fresh capital into the market, with traders building long positions.

Liquidation of Short Positions

Adding to the upward momentum, over $265 million in short positions were liquidated in the past 24 hours. Liquidations of this scale often amplify price movements, creating a feedback loop that propels prices higher.

Ethereum’s Recent Performance: A Mixed Bag

Despite its recent rally, Ethereum’s performance over the year remains mixed. The cryptocurrency has gained 54% in the last month, signaling a strong recovery, but it is still down 26% year-to-date. Whether this rally marks the beginning of a sustained uptrend will depend on several market factors.

ETH/BTC Market Value to Realized Value (MVRV) Ratio

One notable metric suggesting Ethereum’s potential undervaluation is the ETH/BTC Market Value to Realized Value (MVRV) ratio. Recent data shows that this ratio has fallen into a historically low range of 0.4–0.8, levels last seen in 2019. Historically, such undervaluation zones have preceded periods of Ethereum outperforming Bitcoin.

“ETH is now extremely undervalued compared to BTC, the first time since 2019. Historically, this led to Ethereum outperforming.”

However, analysts caution that this signal may not guarantee a repeat of past cycles due to current market conditions.

Factors That Could Impact Ethereum’s Momentum

While Ethereum’s recent rally shows promise, several factors could hinder its ability to sustain this momentum:

  • Rising Token Supply: Ethereum’s circulating supply has reached an all-time high, reversing its previous deflationary trend. Lower transaction fees and reduced ETH burns following the EIP-1559 upgrade have altered its supply dynamics.
  • Flat Network Activity: The number of active addresses and transactions on the Ethereum network has stagnated, indicating weaker demand.
  • Muted Institutional Interest: Institutional flows into Ethereum remain subdued, with major Ethereum ETFs, such as Grayscale’s ETHE, experiencing significant outflows.

In addition, decentralized finance (DeFi) activity—a major driver of Ethereum’s growth in previous cycles—has plateaued, further limiting its upside potential in the short term.

What Could Spark Ethereum’s Next Big Move?

For Ethereum to sustain its current momentum, a new catalyst may be required. Potential triggers could include:

  • The approval of Ethereum staking ETFs, which could attract institutional capital.
  • A renewed surge in DeFi interest or innovations that drive network activity.
  • Major upgrades or developments within the Ethereum ecosystem.

Final Thoughts

While Ethereum’s recent 20% rally is a positive sign, it faces challenges from rising supply, stagnant network activity, and muted institutional interest. The historically low ETH/BTC MVRV ratio suggests potential undervaluation, but macro and on-chain factors indicate caution. Investors should keep an eye on key developments and metrics to gauge whether Ethereum can sustain its upward trajectory in the coming months.

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