Anticipation of the altcoin season has driven up the price of Ethereum (ETH), creating a wave of optimism surrounding the protocol’s native token. This marks a significant turnaround for the second-largest cryptocurrency after months of stagnation.
According to the bank, several factors have contributed to this renewed bullish sentiment. Notably, the Pectra upgrade has addressed critical technical issues within the Ethereum ecosystem, enhancing its infrastructure.
Combined with increased stablecoin activity and the launch of tokenized securities on the Ethereum blockchain, the upgrade has further bolstered demand for ETH tokens, resulting in a new all-time high near the $5,000 mark.
As institutional interest in Ethereum grows, the liquid supply of ETH on crypto exchanges has begun to dwindle, the report shows. Sygnum suggests that this trend raises the possibility of a supply crunch, which could lead to a significant price increase if demand continues to rise.
Moreover, recent legislative developments in the US, including the passage of the GENIUS and CLARITY acts, have further provided clarity around stablecoins, opening doors for institutional offerings where Ethereum already leads in stablecoin and tokenization activities.
As liquid Ethereum reserves on exchanges dwindle and demand continues to surge, the potential for a supply squeeze looms, presenting a new opportunity for investors to capitalize on the expected new uptrend for the token.
When writing, ETH trades at $4,420, surging nearly 3% in the 24 hour time frame and 87% year-to-date. With the broader market correction seen over the past week, the Ethereum price remains 10.6% below all-time high levels.
Featured image from DALL-E, chart from TradingView.com
