Ethereum (ETH) has faced a turbulent period in recent weeks, with its price showing some signs of consolidation around the $2.6k mark in February. While this has raised hopes of a recovery, on-chain metrics indicate that strong selling pressure could limit Ethereum’s potential upside, and there may even be a deeper drop on the horizon.
Ethereum’s Recent Price Action and the Bybit Hack Impact
Ethereum has been trading at around $2.6k, holding onto support despite some market volatility. However, the situation is not entirely promising for the cryptocurrency. A major event that recently shook the Ethereum market was the hack of the Bybit exchange, where a staggering $1.46 billion worth of ETH was drained from its cold wallet. This hack led to significant withdrawal activity, though the exchange has reportedly processed the outflows without much disruption. As of writing, Ethereum’s price is down 2.64% in the last 24 hours.
This price decline is part of a broader downtrend for Ethereum, which has faced challenges since reaching its $4k peak in December. Despite the recent consolidation, Ethereum’s price has struggled to find strong bullish momentum. Analyst RektProof, in a post on social media platform X, observed a pattern from early 2024, suggesting that Ethereum could be forming a similar range to its performance in July-October 2024 before it saw a rally. However, with market conditions still somewhat bearish, the idea of a recovery could be more speculative than reality.
On-Chain Metrics Signal Strong Sellers
A key on-chain metric that has caught the attention of analysts is Ethereum’s seller exhaustion. The seller exhaustion metric is determined by the percentage of Ethereum supply in profit and the 30-day price volatility. Over recent weeks, while Ethereum’s price has shown some consolidation, the percentage of supply in profit has steadily declined. This suggests that many holders are in the red, with a significant amount of supply not benefiting from the recent price movements.
In fact, the seller exhaustion metric is at levels not seen since October 2023. The metric typically serves as an indicator of low-risk price bottoms, where a sizable portion of the supply is not in profit, and the price remains under consolidation. However, the current market conditions do not appear to align with this historical trend, especially on higher timeframes.
Ethereum’s Profitability and Bearish Sentiment
A further indication of the selling pressure comes from Ethereum’s net unrealized profit/loss (NUPL) metric. The short-term holder (STH) NUPL, which tracks the profitability of transactions under 155 days old, is currently in the negative at -0.164. This suggests that short-term holders are at a loss, which is not an ideal sign for a potential price rebound.
While negative NUPL does not necessarily guarantee a local bottom, it’s worth noting that similar scenarios have played out in the past, indicating the possibility of a deeper price drop. In January 2022, Ethereum’s STH NUPL dropped to -0.018 before plunging to -0.4 in February. Despite price consolidation at the $3k level, Ethereum then suffered a significant price decline, ultimately bottoming out at around $1.1k in June 2022.
Ethereum’s Potential for Further Decline
The current market conditions and on-chain data point to the likelihood of Ethereum’s price facing further downward pressure. Ethereum is struggling to break through its resistance levels, and the ongoing selling pressure could push the price even lower. If Ethereum fails to maintain its current support levels, a deeper drop towards $2.1k seems possible.
The combination of technical resistance, declining profitability, and strong selling activity indicates that Ethereum’s recovery could be delayed. While there’s a possibility that Ethereum might see some short-term rallies, the broader market sentiment suggests that sellers could limit the upside in the near future.
Conclusion
Ethereum is at a crucial juncture. While the price consolidation around $2.6k offers a glimmer of hope for recovery, strong selling pressure remains a significant obstacle. On-chain metrics suggest that Ethereum might be on the verge of a deeper price drop, with the potential for a decline toward $2.1k. Investors should carefully monitor the market for any signs of further deterioration or recovery as the current technical and sentiment conditions unfold.
Financial Market Newsflash
No financial news published today. Check back later.
