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Evaluating the Fall in Ether (ETH)
In the past week, Ether (ETH) witnessed a substantial drop in its value, hitting a near-monthly low of $1,825. This slump was connected to Bitcoin's (BTC) poor performance, the general unsettled global economic environment, and a possible mass selling by whales.
Many indicators, both technical and on-chain, hint at a possible further drop in ETH prices. However, due to factors such as profit margins of current holders and a decrease in the supply of ETH, it's expected that any further decline would be restrained.
Deeper Insights from ETH On-chain Analysis
According to Ethereum's Network Value-to-Transaction Value (NVT) metric since 2023, the asset may be overvalued. The NVT signal from Glassnode assesses the relative worth of the Ethereum network by contrasting the market price with on-chain transaction volume. A higher NVT indicates that ETH could be selling at a premium.
The Glassnode NVT chart shows this metric usually fluctuates between 30 and 80. However, early 2023 saw it surge to a three-year high of 120, and it has remained high since, suggesting that a price correction or increased on-chain Ethereum activity could trigger a reset of this metric.
Profit Levels Point to Limited Downturn
Nonetheless, the profit levels of both short-term and long-term holders suggest the downturn may be reasonably contained. Whenever the Net Unrealized Profit/Loss (NUPL) metric for short-term holders falls negative (indicating losses), it usually prompts a reversal of ETH’s negative price action as it triggers panic selling among weak hands, providing buyers the opportunity to acquire coins at a lower cost.
Indication of Likely Pullback from Long-term Holders
The long-term holders' NUPL ratio is also nearing peak levels seen in 2019 and early 2020, an indication that a pullback might be imminent. Meanwhile, the amount of ETH staked for PoS network validation has shown an increase while the ETH supply on exchanges has noticeably dropped after the April Shapella upgrade.
Reviewing Technical Aspects of Price Action
In technical terms, the ETH/USD pair presents a short-term bearish risk, as suggested by an impending death cross on the weekly scale. A review of options data from Deribit shows contracts worth $1.1 billion are due to expire on July 28. The options market indicates a bullish inclination, with a noticeable accumulation of call options between $1,900 and $2,400.
The exposed on-chain and market indicators imply that Ether's negative selling pressure may persist for a few weeks. However, a significant influx of buyers could emerge, especially at the $1,700 and $1,500 support levels.
