Rumors of an Ethereum death cross are stirring up fear of damaging lows as the cryptocurrency currently hovers at a crucial support level. On July 24, the ETH price experienced a nose dive close to its monthly low, coming in at $1,825. This occurred amidst negative Bitcoin price action and a cloud of doubt hanging over macroeconomic conditions and potential whale sell-offs. Multiple on-chain and technical indicators are pointing to an impending fall in ETH prices. However, the extent of this downward wave might be mitigated by existing holders’ profit levels and the decrease in its liquid supply.
Since the onset of 2023, Ethereum’s network value to transaction value (NVT) metric has hinted at a possible overpricing of the asset. Glassnode’s NVT indicator measures the relative value of the Ethereum network by comparing market price to the volume of on-chain transactions. A higher NVT reading implies that ETH might be overvalued. This makes the current three-year high NVT of 120 alarming, suggesting a price pullback or a rise in Ethereum’s on-chain involvement may be requisite for this metric reset.
However, the profit levels of short-term and long-term holders suggest a potential firm bottom. The short-term net unrealized profit/loss (NUPL) metric usually reverses with negative price action, as panic selling by short-term holders allows opportunistic buyers to purchase coins at a bargain. Currently, the short-term NUPL ratio is toeing neutral levels, but history shows there is room for some extent of downside.
Ever since the Shapella upgrade in April, the ETH supply on exchanges has dropped noticeably. Simultaneously, the amount staked for validation of the proof-of-stake network has climbed steadily, thus reducing the liquid supply of exchange, more vulnerable to selling compared to staked ETH.
Technically, the ETH/USD pair shows bearish risk in the short term with the ominous sign of a looming death cross on the weekly scale. On the daily chart, the ETH/USD pair threatens a plunge toward the 200-day MA at $1,761. Derivative data for ETH shows that there has been no significant modification in the open interest volume for futures contracts, indicating traders’ fading interest in the current lackluster price action.
While it seems that Ether’s negative selling pressure might carry on for a while, a surge of buyers is highly likely, especially at support levels at $1,700 and $1,500. However, investors would do well to be cognizant of the possible risks and conduct thorough research before making any decisions.
Source: Cointelegraph
