Ethereum (ETH) is showing a potential to break out, based on ETF trading and mainstream interest. An ETH rally season may precede a full altcoin season.

A market dominated by Ethereum (ETH) may replace a full altcoin market. As ETH spreads to multiple protocols and trades as an ETF asset, its importance and dominance are expected to grow. 

ETH may gain importance and outperform, while other tokens and altcoins lag, some analysts expect. The 2024 bull market may also bring token fatigue, as well as skepticism about L2 and L1 tokens. An ETH rally may be much easier to produce and sustain than rallies and pumps for all assets. 

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ETH remains more transparent, with almost no change to its supply since 2022. With 120M ETH in circulation, a large percentage is also locked in staking or lending protocols. This gives ETH a boost before other high-profile L1 tokens, which still have to show the market can absorb their major unlocks. 

For the past few months, ETH was also stuck in a range, rarely going under $3,000, while stalling at around $3,500. ETH itself survived as a utility token for years, becoming the backbone for DeFi protocols. The relative stability of ETH meant projects like Ethena could use it as a source of collateral and relatively predictable basis trading. 

ETH awaits direction from ETF trading launch

ETH also sees little hype from general crypto investors and awaits a direction from ETF trades or another event to boost price action. ETH volatility is inching up, though with some caution. The volatility marker is up to 2.27%, from 1.67% in late June. For months, the ETH market cap dominance has also been relatively constant, between 17 and 18% of the market. 

Most investors are also undecided on ETH. Both crowd money and smart money are close to neutral, swinging between slightly bearish and slightly bullish. This relative stagnation has caused analysts to see ETH as a “ticking timebomb”, ready to rally once the ETF price action and inflows start. 

Also Read: Spot Ethereum ETFs will attract 25% more US investors: Grayscale

ETH traded at $3,147.75 during a recent day of recovery. The coin is trying to break above its 200-day moving average, possibly signaling a breakout. The past week also saw consistently high trading volumes above $13B in 24 hours. 

ETH has bounced from its lows but is yet to revisit its yearly highs. Even at close to $4,000, ETH did not manage to trigger a full altcoin season, as most new investors went into the meme token hype. The next expected move from ETH would be to reclaim the $3,280 range for a more secure rally. 

ETH is still far from attacking positions to liquidate above $3,600, but a move to that range may accelerate the climb in the short term. The current liquidation heatmap still carries the risk of moving downward to liquidate more positions under $3,000.

ETH moves to generate mainstream acceptance

Ethereum has been attacked by Bitcoin maximalists, as it continues to lag behind the leading coin. Yet ETH is still the leader of decentralized finance and tokenization, while Bitcoin still lacks similar DeFi infrastructure. 

The current status of the ETH ETF means the asset is yet to gauge mainstream attention. The founder of Nvidia Jensen Huand recently made an optimistic remark on ETH as a well-established network.

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As a single gauge of mainstream interest, the Grayscale Ethereum Trust is trading at a discount. The fund is now available at the equivalent of $2,900 per ETH, lagging the recent spot market recovery. Yet the ETHE stock price quickly reflects the performance of spot ETH during more bullish periods. 

Grayscale retains most of its haul of 2.96M ETH, acquired at much lower prices, and has stopped sending funds to exchanges for now. 

The Ethereum network is tied to other assets, mostly through the flow of altcoins. For now, altcoins still flow from Ethereum into several L2 protocols. However, Ethereum-based USDT and other stablecoins may remain within the Ethereum market, if the asset is more promising. 

Some predictions see ETH as becoming the trigger for an altcoin season if investors want to risk with smaller, more volatile assets.  

Cryptopolitan reporting by Hristina Vasileva