The rising price of ether and the fall in the amount held on centralized exchanges is fuelling speculation of a possible altseason in the crypto markets.

"Ether has got substantial momentum behind it, breaching the $3,000 mark and gearing up for its highest weekly close in 97 weeks. This surge is fueling discussions about the potential onset of an 'altcoin season', a phase where alternative cryptocurrencies outshine bitcoin," Bitfinex analysts said in this week's Bitfinex Alpha report.

Earlier this week, ether breached the $3,000 threshold. The positive price action marks the digital asset's highest value in 22 months and positions it to achieve its highest weekly close in 97 weeks.

At the same time, there has been a notable reduction in ether reserves on centralized exchanges. "This net outflow indicates a strong supply crunch that could propel ether's price further," Bitfinex analysts said.

Ether exchanges reserves have declined since the beginning of the year. Image: CryptoQuant.

Citing data from CryptoQuant, the Bitfinex report said that since the beginning of January, centralized exchanges have recorded net outflows exceeding 800,000 ether, valued at approximately $2.4 billion. "This substantial decrease in the ether exchange reserve balance is highly bullish for the asset, possibly representing the strongest supply crunch for the asset since the Shapella upgrade," the analysts added.

The report speculated that the ether being removed from exchanges could be destined for long-term holding and staking, reducing the available supply and potentially exerting upward pressure on its price.

Ether price rally continues

According to CoinShares Research Associate Luke Nolan, the ether rally is linked to a number of key developments within the Ethereum ecosystem. These include the potential introduction of a spot ether ETF, the Dencun upgrade, and the introduction of restaking platforms such as EigenLayer.

"Attention is shifting to Ethereum ETH +2.00% given the upcoming Dencun upgrade as well as the potential approval of a spot ether ETF in May. Also, EigenLayer has reached over $8 billion in TVL in three months, there is certainly some excitement around the new restaking primitive, which possibly has caused some excitement to drive back to Ethereum on chain activity," Nolan told The Block.

These developments are perceived as significant catalysts for ether's resurgence, especially after a period where it had lagged behind bitcoin in terms of percentage growth over several months.

In the past 24 hours, the price of ether held above the $3,000 mark, now trading at $3,313 at 7:54 a.m. ET, according to The Block's Price Page. The GM 30 Index, representing a selection of the top 30 cryptocurrencies, has increased by 2.76% in the past 24 hours, now at 125.67.

The price of ether has increased over 1% in the past 24 hours. Image: The Block.