Ethereum’s Q4 breakout is set to face some turbulence ahead. In the previous cycle, Bitcoin surpassed ETH by almost 2x, indicating that BTC dominance continues to be a significant challenge. Institutional players are gearing up for another surge, as significant capital is being funneled into BTC ETFs. ETH is currently at a critical juncture. In the last week, it has established two higher lows, each accompanied by a clear break of resistance. A pivotal move around $4.5k is essential to ignite FOMO and attract new buyers.
In a significant development, stablecoin supply on Ethereum reached an all-time high of $172 billion. According to data, stablecoins on the Ethereum network have surged by 44% this year, with nearly $1 billion injected in October alone. ETH Total Value Locked surged by 6.37%, reaching $167 billion and marking a return to levels seen in 2021. In summary, ETH has started Q4 with liquidity returning to the L1. Following a -5% dip in September, it appears that investors are re-entering the market and accumulating new positions, bolstering a robust on-chain setup. Ethereum supply reaches a historic low as demand continues to surge. Data provides robust evidence for the bullish thesis.
Over the last week, approximately 18,000 ETH entered the market, as exchange reserves plummeted to an eight-year low of 16 million. Notably, around 183,000 ETH was transferred off exchanges, while $1.3 billion was funneled into Ethereum ETFs. The setup indicates a clear supply-demand squeeze. Additionally, 36 million ETH have already been staked, resulting in a tightening free-floating supply. In this context, the increasing supply of stablecoins provides significant dry powder for ETH spot demand. In summary, while BTC typically takes the lead in Q4, ETH is maintaining its momentum.
The 9% rally this week is not a coincidence. Instead, it’s supported by robust on-chain flows, with bids maintaining position beneath ETH’s two higher lows. With the supply squeeze in effect, $4.5k appears poised for a clear third higher low. Consequently, on-chain metrics and structural analysis indicate that ETH is positioned strongly for a bullish Q4. Liquidity returning to the network is providing it with genuine “spot-led” strength, positioning a breakout from $4.5k to $5k as imminent.