ETH Price News: Stablecoins on Ethereum Rose by 13% in August – Is ETH’s Rally Just Starting?

The amount of stablecoins parked on the Ethereum network rose by 13% in August, moving from $133.8 billion to nearly $150 billion according to data from DeFi Llama.

This indicates that investors’ interest in the crypto market continues to be high at a point when the top altcoin has made a new all-time high.

Stablecoin Reserves on Ethereum – Source: DeFi Llama

In the past 7 days alone, stablecoin reserves increased by 5% while they have accumulated a 32.4% increase since the year started.

The Pectra upgrade may have helped in accelerating this increase. The DeFi Llama chart shows that nearly $25 billion worth of stablecoins were brought to the Ethereum ecosystem since July 16 compared to just $14 billion during the previous six and a half months.

Until last Friday, ETH-linked exchange-traded funds (ETFs) accumulated a 6-day streak of strong net inflows, bringing in nearly $1.9 billion from August 21 to August 28.

Paired with an increase in stablecoin balances, both on-chain and off-chain data confirm a bullish outlook for Ethereum (ETH) despite the token’s latest retreat.

Bearish Divergence Pops Up in The RSI

The daily chart shows that Ethereum just broke a long-dated ascending price channel that started to form in late June as the token bounced off the $2,100 level. This is an important bearish breakout that could result in a push toward the $4,000 level.

ETH/USD Daily Chart (Binance) – Source: TradingView

This key area of support acted as resistance many times in the past. If the price drops to this level, it could be a great opportunity for late buyers to scoop up some tokens at a much more decent price entry.

It seems highly likely at this point that ETH will bounce off this key area that has both technical and psychological relevance. We may also expect some sort of consolidation between $4,000 and $4,800 before the next move upwards.

The Relative Strength Index (RSI) shows that positive momentum has been fading for ETH. We can see a bearish divergence popping up already as the oscillator made lower highs even though the price kept reaching higher levels.

This means that the strength of the latest price upticks diminished compared to previous rallies. Hence, we could expect a sizable correction from this point before the next move higher. If the $4,000 level is broken, ETH could experience a more dramatic decline to its 200-day exponential moving average (EMA) at around $3,100 – $3,200.

Macro Backdrop Favors Long-Term Bullish Outlook

Despite this first sign of weakness, the next leg up for ETH could still push the token to $5,000. In the long term, the stage looks set for much stronger moves toward higher targets, possibly to $6,000 and beyond as the Pectra upgrade has improved the network’s operational framework.

Ethereum L2s can now accommodate more transactions per block and offer lower gas fees while Pectra also creates room for an increase in token burns. Meanwhile, ETF inflows remain strong and assets under management (AUM) have kept making new all-time highs in the past few weeks.

Ethereum ETFs AUM (Daily) – Source: The Block

Meanwhile, the head of the Federal Reserve, Jerome Powell, confirmed that the U.S. central bank will start lowering its benchmark interest rate soon. Market analysts surveyed by FedWatch believe that the first cut will be implemented during the September FOMC meeting.

Lower rates favor a bullish outlook for risky assets like cryptos and especially for Ethereum (ETH) as Bitcoin’s dominance has been declining lately as altcoin season seems ready to kick off.