The September 7th flash crash came at an unfortunate time when Ethereum challenged the $ 4,000 price cap. At the time of writing, the King Altcoin had been in the red for three days in a row. The timing is particularly interesting here, as it followed a rally of over 1.5 months. So was this lightning crash a hidden blessing?
Many in the market have speculated that this flash crash might have been a good entry point before the price started rising again.
It is noteworthy that Ethereum is already starting a journey north, at least in a shorter time frame. In fact, ETH hit higher lows at the time of going to press.
While the ETH price was below the 20-week SMA on a one-day chart, this had re-established itself as a support over a shorter period of time. But what drove this recovery?
Whales are rushing in
When the price fell, the number of top 10 ETH whale addresses in particular rose over the past 15 weeks. You now own 21.38% of all ETH.
This is the highest amount they have held in around 51 months, Santiment points out. The accumulation of whales bodes well for the top altcoin price development.
That being said, whales have been quite active during last week’s market correction. For example, according to Whale Alert, whales moved more than $ 1 billion in Ethereum through 21 separate transactions.
What’s more, one unknown wallet sent to Binance a whopping 99,990 ETH on Tuesday valued at around $ 345 million. This was the largest of the transactions tracked in the past week.
ETH on a deflationary path?
Economists have taken an interest in crypto’s deflationary systems because they are absent from the financial market. But there has also been skepticism about a deflationary currency system, which inevitably leads to hoarding and liquidity problems, for a long time.
If you look at how well ETH held up and recovered during this mini-crash, it will be interesting to see if this was also due to ETH deflation.
This year represented a rather strange fall as Ethereum’s foreign exchange reserves fell to a lower level than Bitcoin’s. Although both assets had a higher coin shortage, the same was greater for ETH than for BTC.
On September 8, Bitcoin’s foreign exchange balances relative to its total circulating supply hit a three and a half year low of 13.32%.
Furthermore, this time around, it seems that Ethereum is getting scarcer on centralized exchanges as its scarcity has overtaken that of Bitcoin. The macro trend of the increasing scarcity of Ethereum and Bitcoin over time implied that the exchange rate relative to the circulating supply for ETH was lower than that of BTC.
In addition, ether incineration set a new record as the daily ether incineration number neared the 15,000 mark. All of these factors can cause Ethereum to become more deflationary and act as a safety net if the price goes down.