Ether (ETH) is exhibiting a bullish continuation pattern that suggests a potential rally towards $6,000, while a decline in ETH supply on exchanges points to a possible supply squeeze.

Bull Flag Formation

Ether's price chart has revealed a "bull flag" pattern, a technical formation that typically indicates a continuation of an upward trend after a period of consolidation. This pattern emerged after ETH experienced a substantial surge, increasing over 126% between June 22 and August 14, reaching a multi-year high near $4,800. The breakout above the flag's upper boundary at $3,770 confirms the bullish signal, suggesting a potential 34% move toward $6,100.

Currently, ETH is consolidating below its all-time high of $4,867, following a 45% rally from a low of $3,354 on August 3. Trader Mister Crypto has identified $6,000 as the next target, with bulls aiming to push the price above the key resistance level of $4,700. A successful breakthrough could trigger further buying, potentially propelling Ether towards $6,150. However, it's important to note that the success rate of bull flag patterns is around 54%, indicating that while the signal is positive, it's not a guaranteed outcome.

Declining Exchange Supply

Adding to the bullish outlook, the percentage of ETH held on exchanges has fallen to 12.36%, the lowest level since July 2016, according to data from Glassnode. This decrease in exchange-held supply is being interpreted as a sign of a "supply squeeze," where strong demand encounters a dwindling available supply, potentially driving prices even higher.

Merlijn The Trader highlighted that only 18.5 million ETH remains on exchanges, attributing this to aggressive buying by spot Ethereum ETFs and treasury companies. The trader noted that "when scarcity meets demand, price doesn't go sideways," suggesting an incoming supply squeeze.

Furthermore, over 35.7 million ETH, representing 30% of the total supply, is currently staked, according to UltraSound Money. This further reinforces the idea of strong holder conviction and reduced sell-side pressure. The combination of a shrinking exchange supply and growing accumulation indicates that market participants are anticipating a long-term bullish phase.

Institutional Demand and Analyst Projections

Increasing institutional demand is considered a key driver of the trend of diminishing ETH supply on exchanges. Spot Ethereum ETFs and ETH treasury companies are actively accumulating ETH, contributing to the supply squeeze.

While some analysts remain cautious, citing the relatively modest success rate of bull flag patterns, others have made more ambitious projections. Some suggest that Ethereum could potentially rise to between $12,000 and $30,000, driven by increasing institutional demand through spot Ethereum ETFs and ETH treasury companies. These projections, however, remain speculative and should not be taken as actionable investment advice.