One of Ether’s on-chain indicators signals that the token has entered its bottoming phase.
Ethereum’s native token Ether (ETH) saw a strong relief rally after falling to $880, its lowest level in eighteen months, on June 18.
Ether price broke above $1,150 on June 19, marking gains of more than 30% in just two days. However, at the start of the new weekly session on June 20, the ETH/USD pair hinted at erasing its weekend gains, with its price falling nearly 9% from a high of $1,150.
ETH Price Recovers 30% in Two Days
PostyXBT, an independent market analyst, told his 79,800 followers to beware of the recent ETH price rally, noting that the move “would be a clean fakeout.” An excerpt from his statement reads: “Looks like an opportunity to go long towards $1,250, but BTC has yet to regain its similarity level.”
The statements come at a time when Ether, along with other major cryptocurrencies including Bitcoin (BTC), Solana (SOL), and Cardano (ADA), have entered a bear market.
The ETH/USD pair is currently trading 77% below its all-time high of $4,951, but some tokens are down 90% from their 2021 highs.
Concerns about the Federal Reserve’s tighter monetary policy to control inflation have fueled these sales, hurting parts of traditional stock markets. Specifically, the US central bank plans to raise benchmark rates until 2023, which may leave investors with less liquidity to buy riskier assets like BTC and ETH.
In addition, forced sales and liquidity problems led by the so-called decentralized finance, or DeFi, sector have added downward pressure on the cryptocurrency market, thus limiting the prospects for Ether to continue its recovery going forward.
Analyst “Capo of Crypto” claims that ETH has not yet bottomed and its price could fall further towards the $700-$800 range.
Signs that the ETH Price has bottomed?
Meanwhile, a metric that tracks the differences between Ether’s market value and realized value suggests that the ETH/USD pair is about to bottom.
The “MVRV-Z Score”, as it is called, assesses when Ether is overvalued or undervalued relative to its “fair” or realized price. Therefore, when the market value has exceeded the realized price, it has historically marked a top of the Bull Run.
Conversely, the market value falling below the realized price has indicated a bear market bottom (the green area in the chart below). Ether’s MVRV-Z Score entered the same buy zone in early June and is now consolidating within it.
This, however, does not necessarily mean a change in trend, based on the MVRV-to-price ratio witnessed during the 2018 bear market.
In particular, Ether’s MVRV-Z Score slipped into the green zone on August 12, 2018, when the price hovered around $319. But the Ethereum token bottomed out much later on December 14, 2018. 2018, when it almost reached USD 85.
In other words, Ether has entered a bottoming stage, at best, if the on-chain fractal remains valid for the remainder of 2022.
By Audy Castaneda
