Ethereum’s Outlook Amidst Recent Events

Ethereum’s consolidation around $2.6k in February offered some hope for recovery.

On-chain metrics revealed that the altcoin’s sellers aren’t exhausted yet.

Bybit Hack Impact

The Bybit hack saw $1.46 billion worth of Ethereum (ETH) siphoned out of a cold wallet. The exchange experienced an unprecedented amount of withdrawals, but it managed to process them smoothly. At the time of writing, ETH was down 2.64% in the last 24 hours.

Crypto analyst RektProof noted a pattern emerging in a post on X. The range formation from Q1 2024 seemed to remain intact, while the recent events provided a deviation below the lows. This area was also where accumulation occurred from July to October 2024, prior to a swift rally in November.

A comparison was made with Bitcoin (BTC) making cycle lows amidst black swan events such as COVID or the FTX crash. This suggests that ETH could be experiencing similar lows. However, is this too good to be true?

Room for Downward Movement

Metrics indicate that Ethereum has room to go lower. The seller exhaustion metric, which is derived from the percentage supply in profit and the 30-day price volatility, has shown an increase in recent weeks as volatility was high while the percent supply in profit decreased.

This rise in the exhaustion metric is used to identify low-risk price bottoms when a significant portion of the supply is not in profit and prices remain under consolidation. However, current market conditions do not reflect this view, at least not on higher timeframes.

The percentage supply in profit has been declining since the price faced rejection from $4k in December. As of press time, this metric was lower than at any point since October 2023. Its weak performance while Bitcoin traded near $100k has frustrated holders.

The short-term holder (STH) net unrealized profit/loss (NUPL), which accounts for transactions younger than 155 days, indicates values below 0 signal losses for STHs. Currently, the metric stands at -0.164.

Combined with the previously mentioned range formation, this may appear to be a good buying opportunity for ETH. Nonetheless, the negative NUPL does not guarantee local bottoms.

For instance, in January 2022, the STH NUPL was at -0.018 and fell to -0.4 by February. After weeks of consolidation around the $3k-level, Ethereum plummeted to $1.1k in June 2022, deepening the NUPL.

While this is an extreme case, it illustrates the importance of using metrics contextually. By examining both price action and the discussed metrics, there’s a chance ETH’s price could drop towards $2.1k.