- ETH could drop below $1,500 as many old coins changed wallets.
- The sentiment remained bearish, but ETH’s burn mechanism could rescue the altcoin in the long-term.
Ethereum’s [ETH] plunge to $1,540 has been accompanied by interesting changes that could push the altcoin into capitulation, Santiment revealed. The on-chain analytic platform, in its 12 September post on X (formerly Twitter), noted that a large number of ETH have been transferred from old wallets.
🐳 #Ethereum dropped to $1,540 for the first time since March 12th, and this coincided with large quantities of stagnant $ETH moving away from old wallets. A continued dip in mean $ age while prices drop is a capitulation sign, which foreshadows reversals. https://t.co/50jK2C7aLi pic.twitter.com/4RhtlVX3rr
— Santiment (@santimentfeed) September 12, 2023
Oldies leave their former abode
The post focused on using the Mean Coin Age (MCA) to decipher the possibility. The MCA is the sum of a coin’s Unspent Transaction Output (UTXO) alive at the time of coin creation.
As a long-term indicator, a drop in the MCA implies a massive movement of UTXOs that have been immobile for a long period.
Read Ethereum’s [ETH] Price Prediction 2023-2024
At the time of writing, ETH’s 90-day MCA had decreased to 41.07. This further affirmed Santiment’s position that a big fall could be close. Although the 90-day dormant circulation has now reduced, the surge to 634,000 on 11 September reinforced the notion that old coins were moving in droves.
So, the spike implies that it’s not just the two to five years dormant coins on Ethereum that are moving. Those who have remained stagnant for just three months joined the party.
Source: Santiment
Previously, AMBCrypto had explained why ETH’s price action could remain bearish. However, Santiment mentioned that after the rain comes sunshine, noting that relief could come to ETH after the projected price drop.
Is light at the end of the tunnel?
However, traders do not expect the recovery to be anytime soon, as shown by the funding rate. As of this writing, ETH’s funding rate was -0.003%. Since perpetual futures contracts can be held indefinitely, it becomes very necessary to have the funding rate.
Funding rate is the amount of an asset paid between long and short-positioned traders with open contracts. When the funding rate is positive, it means that longs are paying too short to keep their position. In this case, traders’ sentiment is bullish.
But a negative funding rate means that shorts are paying longs a funding fee. Here, like it was with ETH, the sentiment is bearish. So, the broader bias was for ETH to drop much below $1,500.
Source: Santiment
For now, Ethereum may need to depend on other metrics besides its market-based indicators in the hope of recovery. One metric that comes to mind is the Ethereum burned supply.
This Ethereum burned supply represents the cumulative sum of ETH incinerated since the implementation of the EIP-1559. For context, the EIP-1559 was implemented during the London Hard Fork— the same period Ethereum began the burn mechanism.
In EIP-1559, the base for transactions is not sent to any miner/validator. Rather, it is burned as a means to reduce ETH’s supply and improve its value in the long term.
Source: Glassnode
Is your portfolio green? Check out the ETH Profit Calculator
Lately, ETH turned inflationary, which could be a cause for concern. However, the burned supply of Ethereum had also increased to 4.25 million (as displayed above).
If the number continues to increase, then ETH may get back its deflationary pressure, and in the long term, could be profitable for its price.