- Ethereum’s number of wallets in loss reached a seven-month high
- Metrics and market indicators suggested that ETH’s price might decline further
Over the last few months, Ethereum [ETH] witnessed a decline in its network activity. This was the case as the blockchain’s monthly average active addresses dropped.
The monthly average of active ETH addresses stood lower than the yearly average. This clearly indicated low activity, which could be taken as a bearish signal. While the blockchain’s network activity declined, its price also failed to shoot up.
Is Ethereum’s reluctance to push its price up a consequence of less network activity?
Source: Glassnode
Read Ethereum’s [ETH] Price Prediction 2023-24
The reason for ETH’s price drop
According to CoinMarketCap, ETH was down by more than 9% in the last seven days, reflecting its sluggish behavior. At the time of writing, it was trading at $1,670.05 with a market capitalization of over $200 billion.
The price drop had a major impact on investors’ portfolios. As per Glassnode Alerts’ tweet, the number of ETH addresses in loss reached a seven-month high of 42,602,870.333.
📈 #Ethereum $ETH Number of Addresses in Loss (7d MA) just reached a 7-month high of 42,602,870.333
View metric:https://t.co/eTr2V1rqmQ pic.twitter.com/lEkFdTk0XV
— glassnode alerts (@glassnodealerts) August 21, 2023
However, upon taking a closer look, the reason behind the downtrend might not have been less network activity. This was because while ETH’s active addresses dropped, Layer-2s like Base, Optimism [OP], and rollups gained popularity.
The primary reason behind market participants shifting to L2s was that they offered more scalability. For reference, Coinbase’s L2 Base bridged $251 million, with ETH accounting for $155 million out of the total within days of launch.
A closer look at Ethereum’s state
A look at Ethereum’s on-chain performance gave a better understanding of what was going on in the ecosystem. Upon checking, it was revealed that investors in funds and trusts, including Grayscale, have relatively weak buying sentiment.
Additionally, as per CryptoQuant, ETH’s net deposit on exchanges was high compared to the seven-day average, suggesting high selling pressure. However, it was interesting to see that when ETH fell victim to the latest price correction, investors took it as an opportunity to increase accumulation.
This was evident from Glassnode Alerts’ tweet, which pointed out that Ethereum’s exchange outflow volume reached a one-month high during that period.
📈 #Ethereum $ETH Exchange Outflow Volume (7d MA) just reached a 1-month high of 9,627.006 ETH
Previous 1-month high of 9,608.990 ETH was observed on 20 August 2023
View metric:https://t.co/LzFffVHu6i pic.twitter.com/dhJIEP4CZO
— glassnode alerts (@glassnodealerts) August 21, 2023
How much are 1,10,100 ETHs worth today
Not only metrics, but a few market indicators were also bearish. For example, the Moving Average Convergence Divergence (MACD) displayed a bullish edge in the market.
Furthermore, ETH’s Chaikin Money Flow (CMF) also registered a downtick, increasing the chances of a price decline. Nonetheless, the Money Flow Index (MFI) rebounded from the oversold zone, which can help the token increase its price.