Ether (ETH), the native cryptocurrency of the Ethereum network, experienced a dip in its price this week, indicating possible further downside. However, the decline may find some resistance due to the profit levels of existing ETH holders and a decrease in the coin's liquid supply. As the crypto market navigates through volatile conditions, Ether has not been immune to the challenges, and multiple factors are influencing its current price movements.
On July 24, Ether's price dropped to its monthly low of $1,825, influenced by negative price action in Bitcoin. The uncertain macroeconomic landscape and concerns about a potential whale sell-off contributed to this downturn. Various on-chain and technical indicators are also suggesting the possibility of further downside for ETH prices.
One significant indicator, the network value-to-transaction value (NVT) metric for Ethereum, has been signaling potential overpricing since the beginning of 2023. The NVT metric, provided by Glassnode, compares the market price to the volume of on-chain transactions, and a higher NVT reading suggests ETH might be trading at a premium. Despite this, the profit levels of short- and long-term holders may limit the extent of the potential drop. When the net unrealized profit/loss (NUPL) metric of short-term holders turns negative, panic selling often occurs among weaker investors, creating a buying opportunity for others.
The decrease in ETH's liquid supply is another important factor at play. Following Ethereum's Shapella upgrade in April, the supply of ETH on exchanges has significantly reduced, while the amount staked for the validation of the proof-of-stake network has increased. This reduced liquid supply makes the cryptocurrency less susceptible to selling pressure.
From a technical perspective, the ETH/USD pair shows bearish risk in the short term, with a potential 'death cross' forming on the weekly scale. A 'death cross' occurs when a short-term moving average crosses below a long-term moving average, indicating a potential significant sell-off. Derivatives data for ETH suggests that traders currently show little interest in the recent lackluster price action.
For Forex and crypto traders, the developments in the Ethereum market have significant implications. The ongoing uncertainties surrounding Ether's price and the potential for further downside indicate an environment of increased volatility and risk in the crypto space. Traders closely monitoring these signals can position themselves to take advantage of potential buying opportunities at support levels, such as $1,700 and $1,500, or adjust their risk management strategies to mitigate potential losses in the face of a significant sell-off. The 'death cross' formation on the ETH/USD pair may also attract the attention of technical traders, who could consider this as a bearish signal in their trading decisions. As the crypto market evolves, keeping a close eye on on-chain metrics, market sentiment, and technical indicators becomes paramount for Forex traders seeking to make informed decisions and navigate the dynamic landscape of cryptocurrencies.