Ethereum enters ‘scarcity mode,’ paving the way for ETH rally to $6K — Analyst

Ether (ETH) recorded its largest three-day return of 2024, with a 21% spike after President-elect Donald Trump was announced as winner of the US presidential election. The rally also took the altcoin above its overhead resistance of $2,800, breaking a trend bottom consolidation range that lasted 96 days.

Ethereum 3-day chart. Source: TradingView

With the crypto community anticipating a new bullish leg, Ether has flashed a strong buy signal based on a historical setup from 2023.

Ethereum reflects bullish setup from 2023

In 2023, Ethereum witnessed a downtrend between Q2 and Q4, followed by an accumulation range (green box in the chart) in Q3 and the beginning of Q4. Once ETH broke out of the accumulation range, it also registered a break above its descending resistance trendline to exhibit a trend reversal.

The final bullish confirmation was completed after the altcoin exhibited a collective daily close above the 50-day, 100-day, and 200-day EMA levels. Following these confluences, Ethereum rallied by 129% by the end of Q1 2024, reaching a yearly high of $4,100.

Ethereum 1-day analysis chart. Source: TradingView

Now, Ether has demonstrated the exact bullish setup. The chart below highlights that the altcoin had a similar downtrend between Q2 and Q4 and a prolonged accumulation phase in Q3. Over the past few days, each bullish confluence from 2023 has been repeated. ETH broke above the descending trendline and pushed out of its longer-term accumulation range to secure a daily close above the 50, 100, 200-day EMA level.

Ethereum 1-day chart. Source: TradingView

If the price action also undergoes repetition, Ethereum is looking at a price range between $6,000 to $6,500 by Q1 2025.

Related: Ethereum holder turns $38K into $30M after 8 years

Ethereum ETFs welcome $132M inflows

While institutions have aggressively accumulated Bitcoin through spot BTC ETFs, the sentiment has not been the same with Ether. However, ETH’s recent rally has regained smart money’s interest, as Ethereum ETF flows witnessed a $132 million positive net flow between Nov. 6 and Nov. 7.

Data from Farside highlighted a stark contrast between the last couple of days and 2 weeks prior, where ETH exhibited $63.2 million in outflows as recently as Nov. 4.

Ethereum ETF flow chart. Source: Farside.co.uk

Meanwhile, Henrique Centieiro, a venture capitalist, believed that Ethereum is now “entering scarcity mode.” Centieiro listed multiple reasons behind his claim, indicating that a supply crunch and rising demand will trigger a massive rally for the altcoin.

With over 42.6% ETH locked in staking contracts and exchange reserves reaching record low levels in 2024, investors are expected to gain positive dividends from Ether in the long term.

Related: Ether set for $3.2K breakout as ETH ETF inflows turn positive