Is Ethereum currently undervalued?

• Despite the successes recorded around its network, ETH has been unable to move past $2,000.
• At its press time price, the altcoin could be considered undervalued for long-term holders.

When Ethereum [ETH] hit its All-Time High (ATH) in November 2021, a lot of predictions went around, indicating that the $4,000 landmark was a stepping stone to a rise to $10,000. 

Is your portfolio green? Check out the ETH Profit Calculator

Unfortunately, that has not been the case, as ETH has become a shadow of itself, with its price and market cap now one-third of what it was at its peak.

Santiment, in its “Shed a Teareum for Ethereum” insight, considered how the second-largest asset in market capitalization, has registered some growth and has also been unable to cut out some downsides. 

Improving fundamentals, declining value

For a start, Ethereum’s most recent success is the Merge, where it switched from Proof-of-Work (PoW) to Proof-of-Stake (PoS). And as far as scalability goes, the blockchain has had a plethora of projects

Despite these milestones, ETH has been unable to breakout, with Santiment’s Director of Marketing Brian Quinlivan noting that,

“But the lack of any sort of breakout for the asset has gradually left traders paying less and less attention to the asset (in contrast to other large caps) in the year since.”

One reason for the altcoin’s inability to breakout of its tight trading condition is the massive decrease in on-chain transaction volume and trading volume. 

For the unaccustomed, on-chain volume refers to the volume of coins transferred to exchanges from external avenues. On the other hand, trading volume means the volume of coins exchanged within the presence of a third party, like a centralized exchange.

Source: Santiment

From the chart above, both the transaction volume and trading volume were nowhere near the highs recorded in 2021. This depicts a notable drop in ETH utility.

ETH offers an opportunity 

Furthermore, respite may come soon for ETH, especially as whales and sharks have been dumping the cryptocurrency. While this cohort significantly accumulated when ETH capitulated last year, the coin’s rise to $2,100 propelled a long run of profit-taking.

But was ETH undervalued at press time? Well, the Market Value to Realized Value (MVRV) ratio could identify the possibility. 

At press time, the 30-day MVRV ratio was down to -5.25%. The MVRV ratio simply compares the market cap and realized cap with the aim of assessing the valuation and profit/loss holders have had over a period of time.

Source: Santiment

Realistic or not, here’s ETH’s market cap in BTC’s terms

Since the MVRV ratio was in the negative territory, it implies that the average ETH holder had large unrealized losses.

Also, ETH may be closer to the market bottom than it was to the top of this cycle. As a result, it could be a relatively good time to accumulate the altcoin before a full-blown bull market.