Ethereum’s Merge FOMO isn’t priced in, making a spike to $2.6K a possibility

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in May 30 TweetEthereum (ETH) core developer Tim Beiko confirmed that the much-anticipated switch from Proof-of-Work to Proof-of-Stake can be expected “on or around June 8th”.

Interestingly, Ether price action has remained relatively unchanged despite the announcement of an unexpected bullish move. There was a 10% increase on May 30, but those gains were given back between May 31 and June 2. It is very likely that the price of this event is yet to be settled, giving potential early entry gains to traders and investors.

It is necessary to monitor on-chain data

From an investment and trading standpoint, cryptocurrency markets have a distinct disadvantage to more regulated markets and transparency. The stock market is replete with legally required disclosures. In the stock market, the retail trader can identify how many shares of a stock are undervalued, which entities bought (or sold) the large disclosed amount, what insiders bought or sold, and a myriad of other types of information.

Cryptocurrency markets don’t have that kind of legal requirement. In fact, the public does not know whether the bitcoin (BTC) or Ethereum being bought and sold on exchanges is a real cryptocurrency or a type of internal derivative used to facilitate liquidity. But the crypto markets have something better than the stock market and that is on-chain data.

On-chain data allows investors and traders to monitor network activity on the blockchain. This may answer the questions: How many ethers are being sent to the exchange? Are there any major transactions? Is a “whale” wallet big or small? On-chain data can help determine whether a trader or investor should be bullish or bearish.

On-chain data that measures inflows and outflows is often used to determine whether a cryptocurrency is bullish or bearish. Inflow measurements are cryptocurrencies that enter an exchange from an external wallet and are often perceived as a sign of impending selling pressure. Outflow measurements are cryptocurrencies that exit an exchange to an external wallet and are often regarded as an indication of holding or accumulation.

The number of inbound transactions has been relatively flat over the past three months, with a noticeable drop since mid-May.

  • Change in inflow 24 hours: -13.50%
  • Inflow 7-day change: -5.87%
  • Inflow 30-day change: -8.08%
Consolidated exchange flow transaction count. Source: intheblock

However, the number of outflow transactions has declined since March. Furthermore, the date of the most recent Ether flash crash was a major outflow spike on May 12th, which was followed by a resumption of declining outflows.

  • Outflow 24-hour-change: +3.62%
  • Outflow 7-day change: +8.87%
  • Outflow 30-day change: -1.56%
Consolidated exchange flow transaction count. Source: intheblock

It is important to note that since May 29, there has been an increase in outflow and a decrease in inflow. This could be a bullish sign that big money is piling up.

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Ether price remains at key swing lows and oscillators are at historic lows

upcoming merge event One of the most important in the history of Ethereum. It is rare that the world’s second most valuable cryptocurrency remains at a 200-day low and is down more than 60% from its all-time high.

Perhaps the most important and relevant detail for Ether is the position of the Relative Strength Index and the Composite Index.

The Weekly Relative Strength Index remains bullish, but is just above the last oversold level of 40. The current price of 42.15 is the lowest since the week of March 18, 2019.

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Similarly, the composite index is at a historic low. The Composite Index developed by Connie Brown is essentially the RSI with a momentum indicator. It is an infinitesimal oscillator and can capture divergences which the RSI cannot. The weekly composite index value is the third lowest in the history of Ethereum and the lowest since the week of March 26, 2018.

ETH/USD Weekly Chart (Coinbase). Source: TradingView

Extremely oversold readings, increased outflows and decreased inflows on the Ether weekly chart could give Ethereum investors and traders a good reason to be bullish in the near term. While any potential bullish reaction could be rapid and sudden, the 2022 volume point of control is likely to be limited to $2,600.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, so you should do your own research when making a decision.