Ethereum's number two crypto asset has been performing better than most of the rest of the market over the past few weeks, including Bitcoin.
But what causes this epic rally? Here are the three most important factors that feed the latest Ethereum bull run.
Three Major Factors Affecting Ethereum's Last Bull Rally
Since the beginning of January, Ethereum has more than doubled in USD value and has risen above Bitcoin by over 30% and has outperformed the number one cryptocurrency in the market by a large margin.
The number two cryptocurrency has outperformed XRP, Litecoin and thousands of other altcoins.
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But why is Ethereum being pumped more than the rest of the crypto market, Bitcoin and altcoins?
In fact, there are a number of reasons for Ethereum's last rally, but the three most important factors are growth in decentralized finance, weak hands in the market shaken from the market, and an epic short jam that took surprise crypto traders down.
DeFi Growth Causing Interest in Ethereum
DeFi or decentralized finance is the move to use cryptocurrency platforms and core protocols to replace traditional finance with solutions that don't require third-party tools.
Total USD value locked decentralized finance applications recently reached $ 1 billion.
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Explosive growth in crypto-backed loans and the emergence of Ethereum-based DAI stabilcoin increased demand for the Ether token. This increased demand led to a rise in values in recent weeks, with a low supply coming together due to the next key factor.
Ethereum is taking the cake with projects like Maker, Compound and Instadapp when it comes to decentralized finance and central finance (cefi) applications. Defi implementations in ETH touched a turning point on February 6, where locked TVL exceeds $ 1 billion the pic.twitter.com/rtyzss7xb
– Jason @ Jasonvalliere2 Instagram photos and videos • Imgwonders February 9, 2020
Early ICO Investors and Weak Hands Shaken Completely
As the demand for Ethereum increases, the current supply to the market decreases day by day.
Following the full two-year decline and bear market, Ethereum reached critical extreme levels.
This will not only make Ethereum a more attractive purchase for long-term investors, but also keep what those in the snow and those interested in selling Ethereum already in the last two years and the rest in the long run.
Related Resources | Room to Fall: Ethereum Can Drop 90% But ICO Traders Are Still Above 400x
According to the data, the total ETH balance of 8,893 genesis wallets, the first investors in Ethereum ICO, sold most of their assets in profit. The remainder are not interested in selling at current prices, unless they exit the last two years.
The fact that these wallets stay in only 1% or ETH in 81% suggests that the supply that can be sold is extremely low.
Total ETH balance of 8,893 genesis wallets.
Aka, wallets participating in Ethereum's own ICO. pic.twitter.com/w9i6np7xl4
– Alex Svanevik (@ASvanevik) February 11, 2020
Epic Short Squeeze by Confident Crypto Investors
Finally, low supply and increased demand caused the first fluctuation in Ethereum, possibly as crypto traders in short positions as prices rose, which further fueled the parabolic pressure.
When short transactions are closed, it acts as a “purchase” of an asset. As more buying pressure increases Ethereum's price, it forces the short traders to close their positions, increasing the strength and momentum of the price movement, which analysts call a short jam.
With a two-year bear market, crypto traders have always had mental conditions to expect more negativity, leading to short positions at each key resistance level.
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However, as Ethereum and other crypto assets progressed easily at all levels, shorts only stacked even more, causing a huge short jam and an epic rally for history books.
The only fear is that when the short jam comes to an end, a violent long jam in the opposite direction may occur, and when prices reach parabolic levels, a steep collision cannot be ignored in the coming days.