A new report by blockchain analytics firm Santiment suggests that Ethereum’s silent ascent might indicate a bullish breakout in August, if not sooner.
Ethereum, the second-largest cryptocurrency, has experienced a period of relative quiet since its correction from a peak of $2,132 in mid-April. Today, Ether is trading at roughly $1,880, a notch below the psychological support level of $2,000.
Market sentiment and discussion surrounding Ethereum has been subdued over the past few weeks, in part due to the bullish breakout of Ripple (XRP), which has experienced a surge in investor interest following a favourable outcome in a lengthy legal battle with the US Securities and Exchanges Commission (SEC).
The outcome ruled that XRP is not a security, relieving Ripple of a regulatory maelstrom and driving the price of XRP up by 74%, from $0.473 on July 12 to $0.819 on July 14.
Ethereum has been further overshadowed by Bitcoin’s recent bullishness after BlackRock and other giant investment firms filed lucrative Bitcoin ETF applications, signalling institutional adoption.
A new report by blockchain analytics firm Santiment however suggests that while investors have been “bored” by the middling price action of Ether, it’s hardly cause for concern.
Backtests have shown that many altcoins thrive best when traders are “distracted by the other shiny assets” on the block at the time, such as XRP.
Read more: Ethereum Explained | A Beginner’s Guide
“One key sign of a potential upcoming price bottom would be when traders begin making a higher level of transactions while at a loss, compared to when at a profit,” the report stated.
Determining a price bottom is essential for investors, and one key indicator is the ratio of transactions made at a loss versus those at a profit. At present, on-chain transaction volumes indicate that profit-taking transactions slightly outweigh loss-making ones, suggesting a potential price bottom could be near.
However, the report outlines that if the price of Ether drops further and threatens the $1,700-$1,800 level again, “panic sells would come pouring in to justify the buys.”
Trader behaviour is also revealing.
Short-term traders, i.e. addresses that have been active in the past 30 days, have experienced an average return of -0.35% on their Ether investments, nearly breaking even. Long-term traders on the other hand, i.e. those who have been actively involved over the past year, have seen an average return of +14.9%, indicating positive returns.
Although the best buying opportunities typically arise when both are in the negative, the report argues it’s “far from” a bad time for Ethereum, with both percentages so close to neutral.
Further preventing a sell-off is the fact that an overwhelming volume of Ethereum is kept in self-custody, with just 7% of Ether on exchanges. Typically, prolonged self-storage indicates confidence in a digital asset as it suggests a long-term investment strategy, and it significantly lowers the risk of exploitation.
The Ethereum community’s current quietude may signal positive developments on the horizon. Historical patterns show that solid opportunities often arise when traders focus on other top market cap assets, which today are BTC and XRP.
“Patience tends to reward, and we see no reason why ETH can’t make a move to get back above $2,000 sometime in August, or even before the new month hits,” the report concludes.
Disclaimer: CryptoPlug does not recommend that any cryptocurrency should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.
