Ethereum's impressive 56% monthly gain in February 2024 hints at a further rise to $4,000, driven by declining supply and growing demand. On-chain data and network growth support a bullish outlook.
On the last day of February, Ethereum reached its pinnacle at $3,500, marking an impressive 56% surge for the month. Analyzing market supply trends, there are indications that another upward movement toward $4,000 could unfold in March 2024.
February 2024 witnessed Ethereum dominating the price charts, surpassing other major Layer-1 coins like Bitcoin (BTC), Solana (SOL), and Cardano (ADA).
Examining on-chain data reveals key trends favoring ETH for a continued bullish performance in March. The successful execution of the Dencun upgrade testnet and the growing interest in ETH ETF filings significantly contributed to Ethereum's remarkable 56% price growth in February 2024.
Ethereum's Supply Dynamics: $2.1B Transferred to Long-Term Storage
However, on-chain metrics suggest that the effects of investor reactions to these pivotal events could sustain ETH's upward trajectory throughout Q1 2024.
Notably, there has been a positive shift in Ethereum stakeholders' preference for a longer-term investment horizon and passive income yield over short-term profit-taking.
CryptoQuant's Exchange Reserves, monitoring changes in investors' ETH balances on exchanges, shows a substantial decrease from 14,433,873 ETH on Jan. 31 to 13,770,551 ETH on Feb. 29. At current prices of $3,500, this indicates a transfer of $2.3 billion worth of ETH from trading wallets to long-term storage and staking contracts.
This significant decline in exchange reserves means there is now $2.3 billion less ETH available for trading on spot markets.
Ethereum's diverse yield opportunities, such as the 4% APR passive income rewards from the beacon chain for whale investors and various high-yield DeFi staking protocols for retail investors, contribute to the reluctance to book profits early.
With increasing demand for liquidity staking derivatives and the expected improvement in transaction throughput from the Dencun upgrade on March 13, ETH market supply is poised to decrease further in the coming weeks.
If the overall market sentiment remains positive, this induced scarcity could drive ETH's price towards the $4,000 mark in March 2024.
Surging Demand: 1.84M New Users Joined Ethereum Network in February
Ethereum's robust price performance in February has solidified its market position. Supporting its bullish outlook for March 2024, the network welcomed a substantial number of new users in the past month.
Santiment's amount of holders metric indicates a growth from 113.66 million to 115.5 million addresses between Feb. 1 and Feb. 29, with 1.84 million new funded wallets joining the Ethereum network.
The increase in funded wallets underscores deepening global retail adoption and fresh capital flowing into the Ethereum ecosystem. In contrast, the Bitcoin network experienced a decrease of 70,000 wallet addresses in February, highlighting Ethereum's leading position in the markets.
The combination of growing demand from the 1.84 million newly-funded ETH addresses and the $2.3 billion decline in exchange supply suggests favorable market conditions for Ethereum's price to advance towards $4,000 in March 2024.
However, in the short term, bulls must overcome the major resistance sell-wall at the $3,550 territory.
IntoTheBlock's global in/out of money data, grouping ETH holders by their buy-in prices, supports this optimistic outlook. A potential resistance sell-wall may emerge from 1.2 million addresses that acquired 356,130 ETH at the maximum price range of $3,543.
If ETH price successfully surpasses this obstacle, the rally could gain momentum and head towards $4,000, as anticipated.
Nevertheless, Ethereum bears could regain control if ETH drops below the $3,000 support. Currently, this scenario seems unlikely, given the looming sell-wall at the $3,100 area, where 2.1 million investors who bought 1.1 million ETH at an average price of $3,090 may aggressively purchase to avoid falling into net-loss positions.