As a seasoned crypto investor with over half a decade of experience under my belt, I find myself closely following the trends and indicators that could potentially shape the future of Ethereum (ETH). The recent drop in the percentage of ETH holders in profit, as highlighted by IntoTheBlock’s analysis, has piqued my interest.
Approximately two-thirds (61%) of Ethereum investors find themselves in a profitable position following the latest market downturn, as we examine its historical comparison during previous bearish periods.
Ethereum Holders In Profit Have Registered A Notable Drop Recently
On their latest update on platform X, IntoTheBlock delves into the current trends of Ethereum investor profitability. The key metric they’re focusing on is the “Historical In/Out of the Money” ratio, which provides insights into the proportion of ETH holders experiencing profits, losses, or neither, at this point in time.
This measurement determines the average purchase price of coins for each blockchain address by examining their transaction history. If the initial cost of any wallet’s assets is lower than the current market value, it suggests that investor might be enjoying a profit at this moment.
Labels are applied by IntoTheBlock to designate certain addresses as “profitable” or “in-the-money.” Conversely, those addresses where the holders find themselves in a loss situation are categorized as “not profitable” or “out-of-the-money.
Transactions or holdings where the purchase price of the address’s held cryptocurrency matches the current market value are referred to as being “at par” or “breakeven.” These addresses are neither earning a profit nor incurring a loss on their investment.
Here’s a graph illustrating the historical movement of Ethereum being In or Out of the Money for the past few years.
The graph shows that more than 90% of all Ethereum wallets were holding significant amounts (money) during this year’s price surge. However, with the recent market downturn, it appears that this percentage is decreasing.
After a recent drop in trend, the indicator now stands at approximately 61%. This is notably lower than its previous levels seen earlier this year.
In simpler terms, when a lot of investors are making profits, they tend to sell more often, increasing the possibility of a widespread selling event. This situation, where many addresses show profits, has often preceded market peaks in the past.
Instead of bottoms forming when loss holders dominate, they often emerge when the influence of profit-sellers wanes significantly, particularly during periods where they’ve been overextended and are no longer actively selling their profits.
Could the recent drop down to 61% on the indicator possibly indicate that Ethereum has reached its lowest point again? Looking at historical data might give us some clues.
As reported by the analytics company, the metric associated with the 2022 bear market hit approximately 46% at its lowest point, while during the 2018 bear market it dropped as far down as around 3%. Notably, the recovery period from the 2019/20 bear saw the indicator dip below 10%, mirroring the depths of the bear market itself.
In other words, given that the ongoing market downturn could resemble a typical mid-cycle correction, it’s plausible that Ethereum’s profitability ratio may reach around 46% of what was seen during the previous bear market.
ETH Price
To start off the new week, Ethereum dipped down to around $2,300, having previously maintained levels above $2,400 throughout the weekend.
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2024-09-17 23:12