Blockchain analytics provider CryptoQuant sees an Ethereum (ETH) price blackout on the horizon. According to CryptoQuant, potential negative fundamental factors could precipitate a mass sell-off event for the second-largest cryptocurrency by market cap.

Why A Vicious ETH Sell-Off Is Likely

CryptoQuant has pinpointed issues that could trigger a full-blown ETH correction.

The first potential catalyst is the dramatic increase of inflows into the ETH 2.0 deposit contract, where staked ether is trapped until the implementation of the next big upgrade, Shanghai. The amount locked in the contract now represents 12% of the total ETH supply. A chart shared by CryptoQuant shows that the amount of new depositors has been dropping.

With a target release time frame of March 2023, the Shanghai hard fork will make it possible to withdraw staked ETH, tying up loose ends from the monumental September Merge update.

The second factor is that ether balances on centralized exchanges continue declining. Analysts at the on-chain analytics platform harbour the opinion that the forthcoming Shanghai upgrade will likely initiate a major ether sell-off due to the staked ETH withdrawals. There’s some $18.9 billion worth of ether currently staked with the network at press time, according to data aggregated on Dune Analytics.

The Future Outlook For The ETH Ecosystem

It’s now over one year since the crypto market peaked in November 2021, and there are no signs of a new bull rally commencing in the near term. Cryptocurrencies were shaken yesterday following a hawkish speech from the U.S. Central bank. The Fed on Wednesday raised interest rates by 50 basis points as it continues to slow the economy.

While it’s difficult to predict which way the market will move, some believe the positive change in ether’s tokenomics brought about by the Merge technological upgrade could ultimately help the cryptocurrency outperform bitcoin and the broader market once the FTX contagion ebbs and the macroeconomic conditions improve.

Ether is changing hands at $1,177 as of press time, a 4.55% drop over the last 24 hours. Perhaps time will tell whether the No. 2 crypto is due for an epic dump or a bullish trend reversal.

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Filed under: Bitcoin - @ December 17, 2022 8:14 pm