Why Ethereum [ETH] may be preparing to revisit $4,000 level
Ethereum price is hovering inside a compact trading range for the third month. The recent developments suggest that a move outside the upper limit could soon arrive and push ETH to significant barriers.
Ethereum price finds a stable base
Ethereum price is still trading in its range that extends from $2,158 to $3,282. The said barriers were set after ETH climbed 52% between 24 January and 10 February. As of this writing, ETH has descended lower and pierced the $2,820 to $2,966 demand zone.
After a quick recovery into the said demand zone, Ethereum price is using the 100-day Simple Moving Average (SMA) at $2,906 as a support level for climbing higher. However, the upswing needs to flip the 50-day SMA at $3,041 into a foothold for moving higher.
The Relative Strength Index (RSI) supports this upswing scenario. Ethereum price has produced higher lows while the RSI has created lower lows, indicating a hidden bullish divergence.
This setup often resolves, causing the underlying asset to move higher. Therefore, a successful flip of the 50-day SMA will signal the start of an uptrend. In such a case, ETH will likely rally and retest the range high at $3,282.
However, if the bullish momentum continues to pour in, Ethereum’s price might extend the run-up to tag the 200-day SMA at $3,478. ETH was rejected at this level twice over the past three months. Therefore, a local top could form here if the buying pressure continues to wane.
This run-up, in total, would amount to a 21% gain and is likely where a temporary top will be formed for ETH. In a highly bullish case, the smart contract token could revisit the $4,000 psychological level.
Supporting this bullish outlook for Ethereum price is the decline in the supply of ETH on exchanges from 15.23 million to 14.86 million since 4 April. This 370,000 outflow of tokens from centralized entities is a bullish sign as it removes the potential sell-side pressure and also indicates that investors are bullish about the performance of Ethereum.
This indicator falls perfectly in line with the technical outlook that predicts a bullish future for Ethereum from both a short-term and a long-term perspective.