Ethereum (ETH) Price Recovers as Long-Term Holders Show Confidence

Ethereum (ETH), the second largest cryptocurrency by market capitalization, has seen turbulent market performance in recent weeks. Despite the bearish sentiment and network decline, Ethereum price has shown signs of resilience. Currently, Ethereum’s live price is $2,916.04, with a 24-hour trading volume of $6,041,178,931. The cryptocurrency saw a slight increase of 0.49% in the last 24 hours, maintaining its position as a key player in the digital asset space.

ETH/USD 24-hour price chart (source: CoinMarketCap)

Speculative Divergence and Short-Term Holder Concerns

The recent newsletter from analytics firm Glassnode highlighted Ethereum’s underperformance compared to Bitcoin in the current market cycle. Following Bitcoin’s block subsidy halving in April, BTC and ETH both saw their prices drop.

However, Ethereum the corrections have been significantly shallower than those of Bitcoin, indicating a certain level of market resilience. Despite this, the biggest drop for Ethereum this cycle reached -44%, which is significantly higher than Bitcoin’s -21%.

Short-term holders (STH), i.e. those who hold ETH for 155 days or less, are particularly at risk. With their overall cost around $3,000, any further price declines could result in losses for these investors. Glassnode’s analysis of the market value to realized value (MVRV) metric suggests that if Ethereum experiences additional downward volatility, these investors could panic and sell their holdings.

Inflationary Trends After Dencun Upgrade

The recent Dencun upgrade introduced a change in Ethereum’s supply dynamics, marking the end of its deflationary trend. Data from CryptoQuant shows that the total supply of Ether increased from 120 million to 120.1 million between March 12 and May 7.

This inflationary trend emerged due to a reduction in transaction fees following the upgrade, which decreased the amount of Ether burned. Despite this change, Ethereum’s fundamental value, particularly its utility in decentralized applications (DApps), remains strong.

Long-Term Holder Behavior and Market Sentiment

Long-term holders (LTH) of Ethereum take a more patient approach. According to Glassnode, these investors, who typically hold for more than six months, are not rushing to divest despite their profitable positions. This behavior contrasts with previous market cycles in which LTHs increased sales to record levels. Their current reluctance to sell suggests confidence in Ethereum’s long-term potential.

Market sentiment remains cautious, particularly given regulatory developments in the United States regarding the approval of Ether spot exchange-traded funds (ETFs). However, the increase in new Ethereum addresses, reported by Glassnode, indicates growing interest and a potential influx of new investments into the Ethereum ecosystem.

ETH Derivatives Data Analysis

Additionally, open options positions saw a slight increase of 1.63%, reaching $6.38 billion. This rise indicates that even though trading volume is down, there are more options contracts outstanding, suggesting that traders are holding on to their positions longer or preparing for future market movements.

However, the total trading volume on Ethereum derivatives saw a considerable drop of 44.97%, now standing at $12.38 billion, according to Coinglass. This sharp decline indicates reduced trading activity and possibly less investor engagement or reduced speculation in the market.

Analyst Views on the Future of Ethereum

Prominent crypto analysts have weighed in on Ethereum’s price trajectory. Analyst Michael van de Poppe expects a crucial market reversal for ETH in the coming weeks, which has generated considerable attention within the cryptocurrency community. Similarly, veteran market analyst Peter Brandt analyzed Ethereum’s price chart, suggesting that while the trend is too elongated to be considered a flag, the possibility of a channel setup introduces the possibility of a price movement in both directions.

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Despite the prevailing market skepticism, there are signs of a potential recovery for Ethereum. The Relative Strength Index (RSI) on the 4-hour chart indicates a possible short-term upward movement. As Ethereum continues to face these challenging market conditions, the broader crypto community remains vigilant, anticipating significant changes that could reshape the digital asset landscape.

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