ETH - How are things looking now?
Assets covered: Ethereum (ETH)
Metrics used: Price, MVRV365D, Daily Active addresses, Network Growth, Supply on Exchanges, Age Consumed
After bouncing off the $1750 levels in late June, ETH appears to have formed a rising wedge..which is usually a bearish sign for continuation of prevailing trend.
Given that the overall trend is bearish, it's very likely to break down from the rising wedge and continue towards breaking the $1750 levels.
It's hard to ignore the similarities between 2017/18 (when the bubble popped) and the current cycle.
Did the bubble popped this cycle? Well, so far, ETH's been following the trajectory of 2017/18's price action accordingly. And until the price action changes, the bearish bias shall remain.
Looking at the long-term holders, MVRV 365D, is showing that they are pretty much still in profit and not feeling any pain at the moment. So far, we have not hit the undervalued zone (below 0%), which is a worrisome sign of more possible pain to come.
ETH supply on exchanges hit its lowest levels in 1 year. While this may indicate less sell pressure, it's important to note that back in 2017/18's cycle, we saw similar drop as well until the market realized that "it's all over for ETH now" and started to flood the exchanges.
Prior to that, folks were still still hoping to win in flipping ICOs etc, until every other ICO dumped below the ICO price upon listing on exchanges.
One could say that "This time it's different", as ETH can be staked now, and with EIP1559 coming up, it'll be a gamechanger etc.
It's all speculative at the moment and no one will really know how the market will react to the implementation. It could be "buy the rumour, sell the news".
At the end of the day.... once the money making opportunities dry out (be it in degen coins or legit projects), participants will eventually leave, just like what we seen in 2017/18's cycle.
Therefore, it's important to bear (no pun intended) in mind, what keeps the casino going and whether there's still catalyst for that.
Daily Active Addresses (DAA)
Following the drop in May, ETH daily active addresses have taken a tumble as well (-37%) but appears to be normalizing, this is generally showing signs of a healthy network. Further gradual increase in DAA would be encouraging but it's still too early to say.
Just look at what happened in the 2017/18 cycle:
While the above shows existing users and new users, let's take a quick look at actual new users of ETH.
ETH's Network Growth in this cycle so far failed to break previous 2017/18's all-time high. This is likely due to:
- High gas fees limits usage to those with good amount of money
- Better choices fo making money elsewhere (E.g BSC, Polygon, Fantom)
But once again, we are seeing no new blood coming in to prop the price up after having a healthy network growth since March 2020.
And we'll have to ask.... what is required to bring in the masses? For starters, lower fees.
It's been a crazy year so far, with memes, degens, 300 IQs and everything in between making buck load of money... and facing the inevitable drawdown we see today.
ETH's price action isn't looking all that good, setting it at risk of yet another leg down. But if we do get a bounce, it could be a dead cat one if nothing changes.
On-chain metrics are a mixed bag however, in comparison to 2017/18's cycle, it's hard not to notice the similarities of what happens when a bubble pops.
So, has the bubble popped? Who knows, the real question to ask is.. "what's there to keep the party going? If any."
No new blood, no new money, no new ATH.
If that's the case, we'll see you in 2 years' time. Till then, stay safe out there!