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Why Ethereum’s new 2-year high should worry ETH holders like you

2min Read

With high profit-taking, the amount of ETH sent to exchanges rose to levels last seen in 2022. Will it lead to more losses?

Ethereum

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  • Ethereum’s net flows into exchanges rose to a two-year high this week.
  • Market sentiment remains significantly bearish.

Ethereum [ETH] net flows into crypto exchanges rallied to a two-year high this week amid the “legal campaign” to classify the leading altcoin as a security.

AMBCrypto previously reported that the US Securities and Exchanges Commission (SEC) had sent investigative subpoenas to U.S. companies, amongst which is the Swiss-based Ethereum Foundation, the non-profit entity that supports the network. 

According to the report, the regulatory watchdog launched its investigation into the Ethereum Foundation after the Ethereum network transitioned from a Proof-of-Work consensus mechanism to a Proof-of-Stake (PoS) model in September 2022.

Hike in coin sell-offs

IntoTheBlock’s data showed that ETH net flows into exchanges this week totaled $720 million. According to the data provider, the last time the coin’s weekly flow into exchanges was this high was in September 2022. 

When an asset witnesses a rally in its net flow into exchanges, it generally indicates that its holders are moving their tokens onto trading platforms to sell for profit or hedge against further losses. 

These inflows resulted in a minor uptick in ETH’s exchange reserve during the period under review. According to CryptoQuant’s data, it increased by 1%. At press time, 14.2 million ETH valued at around $47 million were held across exchanges. 

Ethereum Exchange Reserve - All Exchanges

Source: CryptoQuant

While the spike in ETH’s inflow into exchanges this week was partly due to the SEC’s move against the Ethereum Foundation, it was also attributable to the general market decline recorded during that period.

Per CoinGecko’s data, the global cryptocurrency market capitalization dropped by 4% in the past seven days due to the surge in coin sell-offs.

ETH holders approach with caution

This week’s assessment of how profitable ETH transactions were, revealed significant bearish sentiments in the market. 

ETH’s Market Value to Realized Value (MVRV) ratio plummeted by 22%, to be spotted at 90% at press time. Likewise, the daily ratio of ETH’s transaction volume in profit to loss plunged to a low of 0.664.

A holistic consideration of these two key on-chain metrics presents a divergence. ETH’s MVRV ratio of 90% suggests potential undervaluation, which could mean it is a good time to buy.


How much are 1,10,100 ETHs worth today?


On the other hand, the 0.664 daily ratio of ETH’s transaction volume in profit to loss showed that there are more investors who are selling their coins at a loss.

This divergence suggests that although ETH is currently undervalued, and now may be a good time to buy. Short-term sentiment among investors remains cautious or bearish. This is because investors are willing to sell at a loss rather than hold or buy more coins.

Ethereum (ETH) MVRV Ratio

Source: Santiment

 

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Abiodun is a full-time journalist working with AMBCrypto. He is also a lawyer with over 2 years of experience. With a keen interest in blockchain technology and its limitless possibilities, Abiodun spends his time understanding the technology, building projects, and educating people about it.
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