ETH price has stalled around the $1,100 level, but various data suggest the altcoin sell-off is far from complete.
Ether (ETH) price plummeted below $1,100 in the early hours of June 14 at prices not seen since January 2021. The move lower marks a 78% correction from the all-time high of USD 4,870 on November 10, 2021.
More importantly, Ether has outperformed Bitcoin (BTC) by 33% between May 10 and June 14, 2022, and the last time a similar event occurred was in mid-2021.
Although Bitcoin oscillated in a tight range two weeks before the 0.082 ETH/BTC peak, this period marked the peak of “DeFi summer” when Ethereum’s Total Value Locked (TVL) catapulted to $93B from $42B two months before.
What’s Behind Ether’s Underperformance in 2021
Before jumping to conclusions, a larger dataset is needed to understand what led to the 31% correction in the ETH/BTC price in 2021. Looking at the number of active addresses is a good place to start.
The data shows steady growth in active addresses, rising from 595,620 in mid-March to 857,520 in mid-May. So not only did the growth of TVL take investors by surprise but also the number of users.
Ether’s 31% underperformance against Bitcoin in June 2021 reflected a cooling-off period after unprecedented growth in the Ethereum ecosystem. The consequence for the price of Ether was devastating and a 56% correction followed that “DeFi summer”.
One must compare recent data to understand if Ether is headed for a similar outcome. In that sense, those who expected the 31% failure against the Bitcoin price bought the altcoin at a cycle low near $1,800 on June 27, 2021, and the price increased by 83% in 50 days.
Is Ether Showing a Buy Signal Right Now?
This time, there is no DeFi Summer and before this year’s 33% negative return against Bitcoin, the active direction indicator was already slightly bearish.
As of May 10, 2022, Ethereum had 563,160 active addresses, in the lowest range in recent months. This is the exact opposite of the mid-2021 move that occurred when Ether price accelerated its losses in BTC terms.
Sentiment in the Ethereum market is currently bearish, with the Fear and Greed Index showing extreme fear. The major support levels are $1,777.97, $1,755.25, and $1,720.61, while $1,835.32, $1,869.96, and $1,892.67 are key resistance levels.
The current forecast for the price of Ethereum is bearish. ETH would need to drop -by 10.87% to reach our target of $1,586.45 in the next five days. Going forward, it will be important to monitor ETH market sentiment, key support and resistance levels, and other indicators. However, we must remember that the cryptocurrency market is unpredictable and even the largest crypto assets show high price volatility.
One would still think that despite a relatively flat number of users, the Ethereum network has been growing by featuring a higher TVL.
The data shows that on May 10, 2022, the Ethereum TVL network had $87 billion in deposits, up from $102 billion the previous month. Thus, there is no correlation between the mid-2021 cool down after “DeFi summer” and the current 33% Ether price drop against BTC.
These metrics show no evidence of similarity between the two periods, but $1,200 could also be a cycle low, and this will depend on factors other than network usage.
Considering how weak active addresses and TVL data were before the recent price correction, investors should be very careful when trying to predict a market bottom.
By Audy Castaneda
