Ethereum’s momentum builds, price eyes $4K milestone

Ethereum’s momentum builds, price eyes $4K milestone   

Even though the general public might not be as excited about crypto as before, experts see strong signs that Ethereum’s price is ready to go higher.

Why the Excitement Around $4,000?

For many in the crypto market, $4,000 is a “pivotal mark” for Ethereum. If ETH can confidently break and stay above this level, it’s considered to be entering a “price discovery phase.” Imagine a rocket breaking through the atmosphere into space; once it’s past known limits, its potential path is unknown and can go much higher. This “price discovery” means Ethereum’s price would be moving into new, uncharted territory, potentially indicating a significant upward trend because there’s no recent trading history at those higher levels to act as resistance.

Expert Opinion: Ethereum Could Outperform Bitcoin

One prominent figure in the crypto space, Michael Novogratz, CEO of Galaxy Digital, believes Ethereum might even outperform Bitcoin (the largest cryptocurrency) in the near future. He revealed that his company, Galaxy Digital, holds a substantial amount of Ethereum – over 52,000 ETH, valued at $194 million. While Bitcoin remains their largest holding, Ethereum is a strong second.

Novogratz noted that assets like gold, silver, and cryptocurrencies are gaining traction because of the current global economic situation. He calls these “inflation markets” because they tend to do well when there’s a lot of money in the economy and interest rates might be cut. He predicts Bitcoin could reach $130,000 to $150,000, but finds Ethereum more attractive due to its “supply dynamics” (how new ETH is created and existing ETH is used) and its growing user base.

More Growth Expected for Ethereum

Ethereum’s price has already seen a significant recovery, jumping over 50% in the last month and more than 160% since April. Experts believe this is just the beginning.

Matt Hougan, Chief Investment Officer at Bitwise, points to increasing demand from large financial institutions and companies as a major reason for Ethereum’s potential continued rise.

“Treasury Adoption”: More and more companies are starting to hold Ethereum as part of their company’s “treasury” or savings. These are known as “crypto treasury firms.” They invest in Ethereum because they see it as a valuable asset that can grow over time and, for ETH specifically, offers potential for earning rewards through “staking” (which is like earning interest by helping secure the network). This trend is rapidly growing, and it’s key for these companies that their stock price is higher than the value of their crypto assets, which is currently the case for companies focused on Ethereum.

Hougan believes that by 2026, Wall Street firms could invest up to $20 billion in Ethereum and related investment products. Given that only about 800,000 new ETH are expected to be created in that same period, this strong demand compared to limited supply suggests that Ethereum’s price is likely to increase further.

Another crypto analyst, David_kml, agrees, setting a “reasonable long-term target” of $10,000 for Ethereum due to its current momentum and increasing adoption.

What is “Open Interest” and “Funding Rates”?

The article also mentions “Open Interest” and “Funding Rates,” which are terms used in more advanced crypto trading:

Open Interest: This refers to the total number of outstanding or unsettled futures contracts for Ethereum on all exchanges. Think of it as the total number of “active bets” on Ethereum’s future price. A high open interest, currently over $27 billion for ETH (the highest in years), shows a huge increase in speculative activity and means many traders are taking large leveraged positions (trading with borrowed money).

Funding Rates: These are small fees paid between traders who hold “long” (betting on price going up) and “short” (betting on price going down) positions in perpetual futures contracts. They help keep the price of these contracts close to the actual market price. The article notes that funding rates are currently “modest” despite the high open interest. This is a good sign, as it implies that most traders aren’t taking overly risky positions, and there isn’t excessive excitement that usually signals a market peak.

“Long Squeeze”: A high open interest could raise the possibility of a “long squeeze” if the market suddenly reverses. A long squeeze happens when the price of an asset falls sharply, forcing many traders who bet on the price going up (long positions) to sell their holdings quickly to avoid bigger losses. This rush to sell can then push the price down even further