Key Takeaways
Tom Lee has projected that ETH could soon top and print a new ATH above $5K. While market positioning aligned with the bullish thesis, U.S. demand has slumped.
Ethereum [ETH] price has dropped to $4K on the 19th of August, a level that Wall Street analyst Tom Lee believes could be the springboard to $5.1K.
In an X (formerly Twitter) post, Lee echoed FundStrat’s Mark Newton’s projection that ETH’s pullback would end mid-week around $4K-$4.15K.
He called it a healthy correction with a potential for ETH to rise to $5.1K in the near term.
“Ethereum is undergoing a minor correction. Pullback to $4,075-$4,150 by midweek. Pullbacks are healthy.”
He linked the projection to Elliot Wave analysis. True to it, at press time, ETH saw a relief bounce at $4K, which doubled as a resistance in 2024. Securing it as a support could embolden ETH bulls.
Source: ETH/USD, TradingView
ETH exchange reserve hit new yearly lows
Structurally, the overall exchange sell pressure has also dropped to a new yearly low.
This suggested that investors have transferred their coins from exchanges either to self-custody or validator operations, further underscoring the bullish cue.
Source: CryptoQuant
Interestingly, the recent pullback was marked by record-high CME Futures Open Interest (OI).
Per Velo data, ETH CME Futures OI topped $8B, thanks to its attractive basis trade that averaged over 10% compared to 7%-9% for BTC.
Source: Velo
In other words, ETH offered more attractive returns for hedge funds leveraging delta-neutral strategies by buying Spot ETH ETFs and shorting CME Futures to collect the 10% basis trade in August.
But in the short-term, a strong rebound could only be realized if demand from U.S. investors recovers.
As of press time, U.S. investors’ appetite for the altcoin dropped sharply in the past few days, as shown by the Coinbase Premium Index.
Source: CryptoQuant
A renewed bid and surge in the metric could confirm Lee’s rally to $5K; hence, worth tracking.
Despite the faltering demand and profit-taking, the overall market positioning for ETH longs has surged in the past three days.
CoinGlass data showed that top Binance traders have increased long positions from 75% to nearly 80%, further underscoring the bullish outlook.
Source: CoinGlass
