Ethereum (ETH) has been showing signs of a potential breakout as its exchange supply plunges to its lowest level in nearly a decade. The reduction in ETH supply on exchanges has raised questions about whether this supply squeeze could trigger a significant price rally. With accumulation rising and sell-side pressure easing, the stage seems set for Ethereum to potentially reclaim key resistance levels in the near term.

Ethereum’s Exchange Supply Hits 9-Year Low

Ethereum’s exchange supply has recently fallen to 8.2 million ETH, marking its lowest level since 2016. This sharp drop is indicative of a liquidity squeeze, which could signal bullish momentum in the medium term. As sell-side pressure continues to decrease, the potential for accumulation has increased, further fueling speculation that Ethereum could be poised for a price surge.

Despite this positive development, Ethereum remains 32% below its post-election peak of $4,016. Ethereum has also experienced four consecutive lower lows, a sign of ongoing consolidation. However, recent technical indicators suggest that the tide might be turning.

Technical Indicators Show Signs of a Potential Breakout

Ethereum’s technical indicators are showing early signs of a potential breakout. The Relative Strength Index (RSI) has recently bottomed out, and a bullish crossover in the Moving Average Convergence Divergence (MACD) is beginning to take shape. These indicators suggest that Ethereum’s recent consolidation could be building the momentum necessary for a move past its key resistance levels.

However, it’s important to remain cautious. Historical patterns indicate that previous recoveries have failed to break through significant resistance due to weak demand and strong sell pressure. Ethereum may face similar challenges this time, especially if demand fails to accelerate.

Key Resistance Levels for Ethereum

Ethereum faces critical resistance at $2,785. At this level, 8.10 million addresses would turn profitable, potentially leading to around $20 billion in sell pressure. This area will be a crucial battleground for Ethereum as it attempts to break free from its current consolidation range.

While Ethereum’s spot exchange reserves hitting a 9-year low suggests increased accumulation, it’s worth noting that over 2 million ETH were offloaded onto exchanges in February. This influx of ETH onto exchanges could increase the risk of mounting sell pressure, potentially hindering Ethereum’s upward momentum.

Demand and Investor Sentiment

Despite the tightening liquidity, there are concerns about the lack of strong demand from key markets, particularly in the U.S. and South Korea. Weaker demand from these regions could threaten Ethereum’s chances of making a significant rally, especially as leveraged long positions in the futures market could become trapped if prices don’t rise.

If demand fails to pick up, Ethereum could face a pullback toward $2,264, where 62.38 million ETH is concentrated. This level has the potential to act as support, but if broken, Ethereum could experience further downside.

What’s Next for Ethereum?

The recent drop in Ethereum’s exchange reserves to a 9-year low has set the stage for a potential supply shock, which could fuel a breakout past key resistance levels. However, with ongoing sell pressure and weak demand from key regions, Ethereum’s rally may not be smooth sailing. Investors will need to closely monitor whether demand picks up in the coming weeks to determine if Ethereum can overcome the $2,785 resistance and embark on a more sustained rally.