Ethereum Price Analysis: ETH 2.0 Staking Deposits to Trigger $2,500 Retest?

 Key Insights:

• Ethereum (ETH) price has held the $2,100 support level this week despite heightened market volatility. 
• The Ethereum 2.0 beacon chain staking deposits have attracted a net increase of 100,000 ETH this week. 
• Historical accumulation trends highlight the support level that ETH has to hold to prevent the bears from wresting control. 

Ethereum (ETH) price has managed to hold firm above $2,100 this week despite heightened volatility in the crypto markets. On-chain data analysis identifies the increase in ETH 2.0 staking deposits as a major factor behind the bulls’ strong showing. 

How will the temporary drop in Ethereum market supply impact ETH price action in the days ahead? 

Ethereum 2.0 Stakers Increased Deposits by 100,000 ETH in 3 Days

Ethereum price rebounded 6% from its weekly low of $2,100, trading as high as $2,255 on Binance on Dec 19. The noticeable increase in the number of coins deposited in the ETH 2.0 staking contracts this week appears to have contributed to Ethereum’s positive performance on Tuesday.  

The staking deposits data tracked by CryptoQuant shows that ETH 2.0 staking deposits have exceeded withdrawals in the each of the 3 consecutive days since Dec 16. Cumulatively the ETH 2.0 beacon chain staking contracts received 100,000 

As seen below, after the drop off on Dec 16, the staking deposits are on the rise again with 93,698 ETH coins staked between on Dec 17 and Dec 18 cumulatively.

An increase in staking during a price downturn is considered a bullish signal, for a few reasons. 

Firstly, it reduces the number of coins readily available to be traded on exchanges. Albeit temporary, this deflationary pressure helps to reduce selling pressure.  

But more importantly, it signals the existing major stakeholders remain confident that the price downturn is temporary. Hence, rather than sell, they opt to tide over the bearish headwinds with passive income from staking. 

These factors appear to have helped ETH maintain a relatively stronger performance as the week unfolds. If the increase in staking deposits persists, it will likely swing the Ethereum  market momentum back in favor of the bulls. 

Forecast: Can ETH Stay Above $2,000? 

Ethereum price looks set to hold firmly above the $2,000 level in the short term. From an on-chain perspective, investors staking their coins to tide over market volatility, could eventually trigger an ETH price upswing. 

However, historical buy/sell trends show that the $2,300 area still poses a significant resistance to the next Ethereum price rally.

The In/Out of the Money Around Price (IOMAP) data, which groups the current ETH holders based on their entry prices, also affirms this tepid price outlook.

It shows that 3.2 million current holders had bought 6.9 million ETH at a average price of $2,302. Ethereum price could enter another pull-back if those holders look to take some profits, after over 1-year of holding unrealized losses. 

But if the ETH 2.0 stakers keep deposititng more coins, Ethererum price will likely smash that resistance and edge towards reclaiming the $2,500 area.

On the downside, the bears could invalidate that prediction if ETH price dips below the $2,000 psychological. But, in that case, the 4.54 million holders that bought 35.09 million ETH at the average price of $2,120 could offer significant support. 

Since the ETH Spot ETF approval is also expected in the next few months, ETH price will likely avoid that bearish scenario in the short-term.