Sirwin
Sirwin

ETH on-chain analysis: warning signs?

By SirK133 | CryptoCat | 1 May 2021


Ethereum's price took off creating a new ATH, but there is some on-chain data that looks disturbing to me.

 

Dormant coins waking up

At the very start, let's clarify one thing - I have a large part of my portfolio in ETH and I believe that as long as it is number one platform for smartcontracts, the maximum price of ETH is unlimited. This does not mean, however, that we will fly to the moon in one vertical line. ETH - the largest altcoin, and when it moves it makes a lot of noise in all kinds of media, that is being repeated as echo in every possible source of information. This means a lot of traders attention and a lot of activity. The activity that woke up the coins that had been sitting on old wallets for squite some time.

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Less exchange withdrawals

This is not surprising given the dynamics of the price movement. ETH is now traded and leaves exchanges less often, although it should be remembered that the chart below does not indicate the amount of ETH that is transferred outside the exchanges, but only the number of transactions in this direction.

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Big Hodlers decreasing while overall adresses at ATH

We also have a clear change in who is holding ETH - the number of fat cats with above 32 ETH in their wallets is decreasing, while the total number of addresses is growing. This means that these new addresses contain rather small amounts of ETH. There is a certain regularity in investments - the more fragmented the capital is the more mobile it becomes. Someone who has invested $ 1 million in ETH has thought it better and is more confident about their game plan. And a lot of these game plans apparently contain sales at recent levels. Someone who has invested a small amount on the one hand may have elevated expectations (despite the fact that he bought in the vicinity of ATH), on the other hand, he often has a problem to hodl tight in a losing position.

As the ETH approaches the psychological limit of $ 3000, it goes without saying that you should expect increased voltality, but I believe that this change in the hodler structure can magnify the voltality significantly. The chart showing the reduced number of addresses >32 ETH is probably the most important one of those included in this post.

 

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Everybody can take profit

Finally, it should be remembered that ATH achieved at such a pace raises indicators such as NUPL (Net Unrealized Profit / Loss) - at the moment everyone is in profit on ETH, but those who bought them early and in large quantities face even bigger temptation to take profits, and those who have bought them recently may be likely to panic. Unfortunately, I do not have access to NUPL for ETH, but I show how many profitable addresses we have. From the late 2020, their number has practically doubled - that's twice as many fingers on the trigger ready to shoot the price down.

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This is no ICO

Finally, let's remember that we are talking about the king of altcoins, the largest platform for smart contracts with a Market Cap of $ 340,479,560,786. I am not abbreviating this number intentionally to remind all of us how gigantic this amount is and how monstrous resources it will require to push it by, for example, another 30%. Here, we are not threatened with pumps & dump, but there are also not enough funds on the market for the price to do x10, (not to mention x100) in the coming weeks, and I am afraid that some new ETH investors are used to such dynamics.

 

In conclusion, I emphasize once again - in my opinion, theoretically there is no limit that the price of ETH can reach and I believe that in the long run there are still many ATHs ahead of us. In practice, however, the ceiling is determined by the current money supply in the market, which is not infinite. I am not sure if new investors remember about it, and at the same time I can see that the big ones seem to be slowly realizing profits. If the price goes down I will be selling a large chunk of my ETH assuming we have a local peak, but if a bigger dip comes up (which I think is more likely than usual) I will definitely buy it.

Or am I wrong? I'm just a guy with a cat on the keyboard staring at the charts. If you see anything other than me, let me know in the comments - a different perspective than my own is the main reason why I'm here.

 

All charts used in this post come form Glassnode.com, exactly as suggested by the huge watermark in the middle.

 

All tips go to cat treats and catnip :) 
 
This is not a financial advice – I’m no financial adviser, nor is this a legal advice – although I’m a lawyer. This is no advice at all, seriously, don’t take advice from random cats – the Internet is full of them! DYOR!

 

PS. Thumbnail of this post contains the current ETH price chart and I'm proud of this fact, as my graphic skills are "limited" to put it lightly ;)

 

 

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SirK133
SirK133

Lawyer, analyst, crypto enthusiast, gamer, poet. I am interested in everything that makes up our world and how it is related.


CryptoCat
CryptoCat

My cat so often stomps the keyboard while I do my crypto research, I might as well make him a co-host here.

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