Ethereum’s price has recorded impressive gains over the past week. Now, that might look promising at first glance. However, this outlook couldn’t be further from the truth as on-chain metrics reveal the possibility of stunted growth for the cryptocurrency market’s favorite altcoin – ETH.
Problems and hurdles stacked against ETH
Despite rallying by roughly 21% over the past week, the volume for Ethereum seems to be unseen. A price spike without a follow-through from volume indicates a fake run-up that is waiting to be reversed.
The on-chain volume for ETH has been trading at 12.93 billion, which is well below the 200-day moving average (MA) at 14.2 billion. This decline in volume, leading to a move below the 200-day MA, has been a persistent trend since 4 March. This seemed to be a sign of lacklustre interest from investors. Hence, the recent leg-up is likely to come undone the first chance it gets.
The 365-day Market Value to Realized Value (MVRV) model is used to assess the average profit/loss of investors who purchased ETH tokens over the past year. A negative value below 10% indicates that short-term holders are selling at a loss and is typically where long-term holders tend to accumulate since the risk of a sell-off is relatively low. Therefore, a value below -10% is often referred to as an “opportunity zone.”
At press time, the 365-day MVRV was at –9.3% revealing that long-term holders have been accumulating for a while. Although the index could move to zero, a further ascent seems unlikely considering past data.
Therefore, the upside for Ethereum price remains limited and lends credence to the technical perspective.
While these two metrics point to the possibility of a lack of momentum for Ethereum’s price, the supply distribution index shows a clear sign of why an uptrend is unlikely for ETH.
The final factor
Over the last three months, the number of whales holding 100,000 to 1,000,000 ETH has reduced from 145 to 140. Simply put, five holders have offloaded their holdings and exited the Ethereum network.
Moreover, the whale category holding between 1 million to 10 million ETH tokens has dropped by two. What this means is that these long-term investors have also gotten rid of their holdings or booked profits.
These activities from whales or institutional investors reveal that they are not optimistic about the performance of Ethereum prices in the near future. Ergo, this is the tailwind to the technical perspective for ETH.