The leading altcoin is trading at a key support level. Crypto analyst Nivesh Rustgi says Ethereum’s ‘death cross’ threatens further downside. According to the analyst, ETH’s technical and on-chain indicators point to further declines. But there is a silver lining!
ETH on-chain analysis points to further declines
As you follow on Kriptokoin.com, the price of Ether has dropped this week. Also, several data points started to show that it could be further downside. On July 24, Ether plunged close to a monthly low, reaching $1,825 amid Bitcoin’s negative price action amid macroeconomic conditions and uncertainty over a potential whale sale.
Various on-chain and technical indicators point to further declines in ETH prices. However, the scope of this downward move may be limited given the profit levels of current holders and the decrease in the liquid supply of ETH. Since the beginning of 2023, Ethereum’s network value to transaction value (NVT) metric has indicated that the asset may be overpriced. Glassnode’s NVT signal measures the relative value of the Ethereum network by comparing the market price with the on-chain transaction volume. A higher NVT value means that ETH may be trading at a premium.
Glassnode’s NVT chart reveals that the metric typically fluctuates between 30 and 80. However, at the start of 2023, it had risen to 120, a three-year high. Also, it has maintained higher levels since then. This suggests that there must be either a pullback in price or an increase in Ethereum’s on-chain activity to trigger a reset on this metric.
Ethereum NVT signal. Source GlassnodeIt is possible that the decline in altcoin price is limited!
However, profit levels from short- and long-term holders indicate that the decline may be limited. Ether’s negative price action often reverses when short-term holders’ net unrealized profit/loss (NUPL) metric is negative, i.e. short-term holders are at a loss. This causes some weak hands to panic sell, allowing buyers to buy the coins at a cheaper price. Currently, the short-term NUPL rate is close to neutral levels. However, there is room for some decline relative to historical levels.
A measure of net unrealized profit/loss for short-term holders of Ether. Source GlassnodeThe realized profit/loss metric, which assesses the relative profitability of ETH transfers, paints a similar picture. On-chain analytics firm Santiment wrote in its latest analysis that “the ratio of on-chain transaction volume to profit-to-loss is still in favor of making profits,” but not by much. Santiment analyst Brian Quinlivan added:
If ETH drops further from here and threatens the $1,700-1,800 level again, panic selling will ensue to justify the buys.
Similarly, the NUPL ratio of long-term holders is hovering near its peaks in 2019 and early 2020. This indicates that a pullback is likely.
NUPL metric for long-term holders of Ether. Source GlassnodeETH supply on exchanges has dropped drastically since the Shapella upgrade in April. At the same time, the amount staked for the verification of the proof-of-stake network has also increased. ETH locked in staking contracts has reduced the liquid supply on exchanges. This is also more sensitive to selling compared to staked ETH.
The realized price of ETH, which represents the fair value of the token based on the daily value carried on-chain, is currently at $1,507. In 2022, ETH quickly fell below the realized price metric as profit levels of long-term holders fell into negative territory.
On-chain metrics suggest that the price will be subject to some selling pressure from short-term holders. It also signals that investors, frightened by the relatively lower levels of activity in 2023, will likely panic sell. However, the profit levels of short- and long-term holders also reveal that the decline may not be long enough. Accordingly, it indicates that altcoin price is likely to find support above the $1,500 level.
Altcoin price analysis
Technically, ETH shows a bearish risk in the short-term with an impending death cross on a weekly scale. Ether has only witnessed a ‘death cross’ between the 50 and 200-period moving averages (MAs) on a weekly scale in June 2019 in the past. After that, the altcoin price dropped 60%.
ETH weekly price chart. Source TradingViewOn the daily chart, ETH at $1,761 is in danger of falling towards the 200-day MA. This coincides with the low peaks of November 2022.
ETH daily charts. Source TradingViewETH derivatives data shows no significant change in open interest volume for futures contracts. This reflects the demand for these contracts. This is proof that traders are not paying much attention to the recent lackluster price action at the moment.
Looking at the options data from Deribit, it is seen that contracts worth $1.1 billion will expire on July 28. The positioning in the options market points to a bullish trend with a notable concentration in call options between $1,900 and $2,400. As the expiry date approaches, the price is likely to remain under pressure around $1,850, which is the maximum pain level for option buyers.
Based on on-chain and market indicators, it looks like Ether’s negative selling pressure could continue for several weeks. However, there is potential for a strong influx of buyers, especially near the $1,700 and $1,500 support levels.
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