Ethereum's native token, Ether (ETH), has the potential to double its market valuation in the coming months, thank you to a confluence of supportive technical and fundamental indicators.

Ether'south price soared past more than ix% on Oct. 1 to hit most $3,300 for the first time in 10 days. Its gains surfaced primarily in the wake of a price rebound beyond all the superlative cryptocurrencies, including Bitcoin (BTC), which gained 9.5% to striking $48,000, its highest level in ten days.

Ether-Bitcoin correlation against rising U.S. inflation

Oct. 1'southward crypto market boom coincided with the release of the United States Commerce Section'due south written report on consumer spending.

The information shows that the U.S. core personal consumption expenditures price index, the Federal Reserve's preferred measure out of aggrandizement, rose past 0.3% in August and was up iii.six% twelvemonth-over-yr. Thus, the core inflation surged to its highest levels in thirty years.

Speculators tend to care for Bitcoin as a hedge against inflation, which explains the benchmark cryptocurrency'south latest response to the college consumer prices in the United states.

Meanwhile, Ether'south 30-day boilerplate correlation with Bitcoin sits near 0.89, as per information from CryptoWatch, which resulted in ETH moving almost in lockstep with BTC.

BTC/USD vs. ETH/USD daily price chart. Source: TradingView

A University of Michigan survey conducted between Aug. 25 and Sept. 27 found that the longer-term aggrandizement expectations amidst U.S. consumers rose to 3%, the highest in a decade.

The consequence appeared in dissimilarity with Federal Reserve Chairman Jerome Powell'southward views, who had described the rise aggrandizement every bit "transitory" for months but admitted during a recent Senate hearing that the higher consumer prices might stay intact at to the lowest degree until the side by side twelvemonth.

As a upshot, inflationary pressures gave crypto bulls a reason to pitch Bitcoin equally an ultimate hedge, with MicroStrategy CEO Michael Saylor suggesting corporations convert their cash-based treasuries into BTC.

MicroStrategy holds virtually 0.v% of the total Bitcoin supply in apportionment, currently worth over $vi billion.

Supply squeeze

Ethereum went through a network hard fork upgrade on Aug. 5 that further raised the bullish outlook for Ether, owing to the archetype police force of supply and demand.

Dubbed the London hard fork, the upgrade introduced an improvement protocol, EIP-1559, that initiated the burning of a portion of Ethereum's network fee, called the base fee. So far, EIP-1559's activation has permanently removed 410,404 ETH (around $i.32 billion) out of active supply, as per Watch the Burn.

Ethereum is besides preparing to switch its consensus mechanism from proof-of-work (PoW) to proof-of-stake (PoS). As a result, information technology has launched a staking pool that will allow users to earn rewards and grow their ETH holdings if they lock 32 ETH into the official PoS smart contract for a certain period.

And so far, the amount of ETH deposited in the Ethereum 2.0 staking contract has surged from around 11,500 in November 2022 to seven.82 one thousand thousand ETH today. That said, the transition has effectively temporarily removed seven.82 one thousand thousand ETH from apportionment.

Full ETH staked in Ethereum 2.0 smart contract. Source: CryptoQuant

On the other hand, the total amount of Ether tokens held beyond all crypto exchanges has dropped to record lows. Data from CryptoQuant shows that exchanges now concord only 18.ane million ETH compared with 23.73 meg ETH a year agone.

Ether reserves across all crypto exchanges. Source: CryptoQuant

The declining ETH reserves show that traders may desire to hold their Ether tokens rather than sell them for other assets, every bit there could exist a supply squeeze for investors looking to enter the Ether market, thus making ETH more than valuable.

Cup and handle

A mix of lower supply and higher need serves equally a bullish backstop for the price of Ether. Meanwhile, more bear witness for an upside breakout comes from a loving cup and handle pattern on Ether's longer-timeframe charts.

Related: Ethereum bears look to score on Fri's $340M weekly ETH options expiry

The loving cup and handle is a bullish continuation pattern, comprising a rounding bottom and a descending aqueduct setup, equally shown in the chart below. The structure's profit target is typically at a length equal to the loving cup's maximum height.

ETH/USD daily price chart featuring loving cup and handle design. Source: TradingView

Because that the cup's resistance level is nearly $4,000, a breakout from at that place could send ETH to above $6,000, most double its current price.

The views and opinions expressed here are solely those of the author and do non necessarily reflect the views of Cointelegraph. Every investment and trading move involves gamble, and you should conduct your ain research when making a decision.