25 February, 2024

Ethereum’s January Rally Signals Promising Growth With Increased Returns

4 weeks ago

01 Feb, 2024

  • Ethereum’s supply dynamics and historical data point to accelerated growth ahead, with potential for increased returns and market volatility.
  • The crypto market’s seasonality highlights Ethereum’s strong performance in spring months like April and May, but caution is needed in June.
  • Layergg suggests that ETH’s current supply dynamics, including staking and deflation, could drive multi-month growth starting in January.

Ethereum, the second-largest crypto by market cap, has historically seen its highest returns in the January to May timeframe, with double-digit growth each month on average. However, according to crypto analyst Layergg, this trend is poised to enter an accelerated phase over the next 18 months due to favorable supply dynamics.

Specifically, factors like staking, deflationary issuance from EIP-1559, decreasing exchange reserves, and the adoption of upgrades like EIP-4844 are constraining Ethereum’s circulating supply growth. Consequently, with demand expected to increase from institutional investment, NFTs, DeFi, and other drivers, prices could rapidly appreciate.

Ethereum’s performance over the past 8.5 years presents a fascinating study in cryptocurrency volatility.  The data shared by Layergg, color-coded for clarity, indicates Ethereum’s fluctuating fortunes. For instance, 2024 began with a modest January uptick (+1.11%), but a predicted July downturn (-3.99%) looms. Contrastingly, 2023 kicked off robustly (+32.44%) but wasn’t immune to fluctuations, as seen in February’s slight dip (+1.26%) and July’s more pronounced fall (-3.99%).

Moreover, 2022 epitomized volatility. It started with a sharp January decline (-26.89%), yet witnessed periods of recovery in subsequent months. The previous years, 2021 and 2020, showcased Ethereum’s potential, marked by high returns in months like January 2021 (+78.51%) and April 2020 (+55.04%), despite a notable March 2020 slump (-38.98%).

Besides these yearly snapshots, the monthly average and median returns paint a broader picture. May emerges as a strong performer, boasting the highest average return (+30.91%), while June lags behind (-7.29%). This pattern underscores Ethereum’s unpredictability and the necessity for strategic investment approaches.

Significantly, the overarching trend signals Ethereum’s strong performances in spring, particularly in April and May. However, June typically underperforms, highlighting a potential seasonal pattern in Ethereum’s market behavior.

Recent financial information indicates that ETH’s value is at $2,308.26, a 2.31% rise within the last day highlighting the cryptocurrency’s volatility.

ETH price chart: CoinMarketCap

However, risks persist regarding high volatility and potential black swan events. Nevertheless, Ethereum’s current supply dynamics of increased staking, restaking, exchange outflows, and deflation constitute tangible tailwinds. Given these conditions, Layergg’s return analysis foresees an accelerated multi-month growth phase initiating as January closes.