Over the past few weeks, higher price consolidation was observed for most altcoins and Ethereum has been one of them. Among various on-chain developments on the back of its $3300-$3400 stagnation, the one observed over the past 24-hours, related to Ether’s transactional USD volumes, was significant. However, its immediate impact on the market may vary according to other factors pertaining to Ethereum’s ecosystem.
Ethereum NVT ratio reaches 15-month high
Now, according to glassnode data, Ethereum’s NVT ratio reached a new 15-month high in the charts, indicating that the network value was rising in comparison to on-chain volumes transferred. NVT Ratio is defined as the network value to transactions ratio but its impact on the market might be dependent on the market state as well.
In order to understand the likelihood of a significant turnaround, let us compare the current price structure of Ethereum with that in June 2020 (the last time when the NVT ratio was this high).
As illustrated in the chart above, Ethereum was witnessing a fractal formation between June 2020 and September 2021, when the NVT ratio reached a similar range. On both occasions, a major dip was observed for Ethereum, before the NVT ratio picked up pace in the charts.
After NVT ratio reached its high in June 2020, Ether’s price consolidated in the same range for 6 more weeks, before breaking out towards a new ATH. So it can be speculated that similar conditions increase the possibility for Ether to reach another ATH level, if the current price range is sustained for the next few weeks.
However, a major change in the narrative between June 2020 and September 2021, is the involvement of the DeFi and NFTs market. In June 2020, DeFi applications were beginning to bud, before exploding in terms of activity and interest. It was a speculative space and there was an air of uncertainty with DeFi. At present time, it is a multi-billion industry as its credibility rose in 2021.
At present, DeFi transactions dominated ETH’s network and the on-chain volume transferred combined both traditional transfers as well as DeFi activity.
How does it change the Fractal narrative?
While the reasoning behind a new all-time high is sound, the fractal narrative changes with the DeFi presence since liquidity is currently more distributed on the Ethereum chain than ever. The price may consolidate longer than expected, or breakout sooner. However, the NVT ratio depicting similar data as it did in the past, is not a case of “history repeating itself” in terms of price movement.