Can Ethereum Hit $2,500 After DeFi Demand Increases?

Despite the largely negative sentiment surrounding Ethereum ahead of the Shanghai upgrade, ETH has traded above $1,700 for ten consecutive days. Will the current gloomy social sentiment encourage crypto investors to pile on ahead of the Shanghai upgrade?

A potential Fed rate cut could sustain a spike in decentralized finance (DeFi) activity on the Ethereum smart contract network.

DeFi Boom Could Carry Ethereum Ahead Despite Shanghai Upgrade Uncertainty

Ethereum (ETH) has attracted new demand as crypto investors continue to move their funds to various DeFi protocols built on the Ethereum network. In addition to declining bank deposits, rumors of a rate cut by the US Federal Reserve (Fed) and further dollar printing have also contributed to the recent DeFi boom.

The recent spike in DeFi activity signals a prolonged Ethereum price rally despite widespread uncertainty regarding the upcoming Shanghai upgrade.

According to Glassnode, there has been a steady increase in the supply of Ethereum in DeFi smart contracts since March 13.

Since March 13, the Ethereum supply in smart contracts has increased by approximately 500,000 ETH (0.4% of the total ETH supply in circulation), worth approximately $832 million as of March 27.

When there is an increase in the amount of tokens locked in smart contracts, it temporarily reduces the units in circulation. The relative scarcity caused by the recent DeFi boom could provide further price gains for Ethereum.

Furthermore, as the scheduled Shanghai upgrade draws closer, social sentiment surrounding Ethereum has taken a beating in recent weeks. According to Sentiment, the weighted price of Ethereum has remained negative since March 13.

As shown by the red line below, the weighted sentiment trended down from a marginally positive value of 0.018 to a negative value of -0.24 between March 13 and March 27.

Weighted sentiment compares the ratio of negative mentions of assets to positive ones. The low values ​​mean that the social sentiment surrounding Ethereum is largely negative. In particular, crypto investors may consider this the perfect time to enter the market.

In summary, if the DeFi boom continues in its upward trajectory, dysphoric sentiment could encourage investors to pile on the buying pressure in the coming weeks.

ETH Price Prediction: $2,500 Is Within Reach

According to Global In/Out of Money (GIOM) data from IntoTheBlock, Ethereum is likely to clear $2,500 soon. As seen below, if ETH can break its current resistance set near $1,800, it will face minimal resistance until it reaches $1,900.

Around $1,900, there are 3 million addresses that may be looking to sell some of their 3.19 million ETH holdings. However, if ETH enters an extended rally, $2,500 could be the next major resistance. In the $2,500 area, 8 million addresses had bought over 26 million coins and could be looking to take some profits.

Nevertheless, if Ethereum price declines below $1,600, the bears could seize the initiative. In the $1,600 area, 6.4 million addresses that bought 9.4 million ETH could act as considerable support.

But if that support cannot stop the bearish slide, ETH could continue to move towards $1,400. The average price that the 6.3 million addresses bought was approximately 14.5 million ETH coins.