ETHEREUM CLOSES ANOTHER WEEK IN THE RED
Ether (ETH/USDT) has just closed another week in the red, having declined in value by 1.58% over the recent seven-day period. Last week, we were mainly focusing on the daily chart and also discussed 5 likely reasons why ETH has been outperforming the King of Crypto (BTC/USDT), so if you have missed that article, you can now easily find it by clicking this link.
Turning to the weekly chart we immediately notice that the second largest crypto by market capitalization ($491B at the time of writing this piece) has been on a short-term Downtrend for a while, as evidenced by three red candles out of the last four. The three latest candlesticks are (for those of you who are not much into Technical Analysis) called spinning tops, just like these toys that you probably remember from your childhood. Candlesticks of this type, especially when there is a few of them in a row in the chart, represent indecision and uncertainty about the future direction of the asset. It means that neither buyers (Bulls) nor sellers (Bears) could gain the upper hand.
These exact emotions amongst the investors have been precisely reflected in the Fear & Greed Index all December so far (we use alternative.me in order to monitor this indicator). The current reading is sitting at 28/100, which indicates Fear, and the moods haven’t been this negative for such an extended period of time, namely for nearly two entire weeks, since the cryptomarket was facing the longest correction phase this year, which happened between mid-May and the end of July.
THE WHALES, THE WALLETS, THE ACTIVE ADDRESSES: ON-CHAIN DATA
Warren Buffet, one of the most famous and successful market investors in the history, notoriously said: ‘I will tell you how to become rich. Close the doors. Be fearful when others are greedy. Be greedy when others are fearful.’ And that’s exactly the reason why we pay so much attention to the aforementioned Index, although leveraging it isn’t always as straightforward as it sounds, otherwise everybody would do it and we would quickly lose the advantage.
In other words, buying every single dip blindly doesn’t necessarily make up an optimal gameplan, instead, we want to buy the right dips. For that purpose, we should look beyond the charts for extra information, and thankfully, in crypto we can find all sorts of additional pieces of info in the form of on-chain data. Let’s discuss the most significant findings then, shall we?
First of all, Ethereum remains the most purchased altcoin, but that’s hardly a surprise at this point, especially considering how well it’s been doing amid the latest market-wide corrections compared to Bitcoin.
One of the most important on-chain metrics is the MVRV ratio, which is basically the average trading returns for the recent 30-day investments made by the market participants. When this ratio is over 0, it means that the latest investors are in profit at higher rates than the average, in other words, they are more likely to contribute to the selling pressure. Currently, the MVRV is just below zero, which is a good sign and a potential green flag for the buyers.
As far as the Daily Active Addresses, which hopefully is self-explanatory, we had a huge spike in this chart on the 5th of December. This probably had to do with the flash-crash the day before, as Ethereum dipped all the way down to $3.5k. The ‘buy the dip’ approach has been getting more and more popular amongst the crypto investors over the ongoing bull cycle without a shadow of a doubt. Also a green flag, in our opinion. Other than that, the Daily Active Addresses average line has been declining for 4 weeks now, which correlates with the price action, so no real surprise findings here.
Now, probably the most significant metric, which tells us everything we need to know about the behaviour of the largest Ethereum investors – the whale addresses that hold between 100.000 and 10.000.000 ETH. These addresses presently hold approximately 53 million ETH, so their owners can easily affect the prices by dumping the tokens on Exchanges. As a matter of fact, we actually did see some selling off by them at the beginning of the month, but the total amount of Ethereum that they got rid of was just below 7000 coins, so nothing to be worried about.
As far as the long-term perspective is concerned, the whales have been steadily accumulating the asset and we will be sure to inform you as soon as this changes, because historically, such shift has always pointed to the likely end of a cycle.
Okay, that is it for Ethereum today. In our previous article on the token, we promised to cover MATIC a bit, but we have ultimately decided to dedicate a separate, extensive article to this asset and it should appear on cryptodaily.co.uk as soon as this week. Stay safe in the markets!
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice