Ethereum (ETH) has been facing a challenging time after hitting a high of $2.7k last week. The altcoin has struggled to maintain its upward momentum and has retraced to a low of $2.3k. Over the past few days, ETH has been trading between the $2.5k and $2.3k levels, leaving analysts wondering about its future direction.
According to CryptoQuant analyst Shayan, Ethereum’s market has been showing signs of overheating near the $2.5k resistance level. This overheating state is characterized by a significant increase in trading volume, driven by profit-taking activity and resting supply at this critical zone. These conditions suggest a potential short-term correction in the market as it cools down and prepares for renewed accumulation.
Despite the surge in volume indicating overheated levels, other metrics paint a different picture for Ethereum. The altcoin is actually considered highly undervalued, and the recent pullback is seen as a healthy retrace. Ethereum’s MVRV Z score has remained in negative territory for four consecutive days, signaling strong accumulation as withdrawals outpace inflows.
Historically, a negative MVRV Z score for Ethereum has signaled macro bottoms in the past. This presents a buying opportunity for investors, as the altcoin tends to bounce back after holding within this territory for a brief period. Additionally, Ethereum’s long-term holders and short-term holders’ MVRV difference has also remained in negative territory, indicating that LTHs are not incentivized to sell their positions.
In conclusion, despite the surge in volume, Ethereum’s market is not overheated but rather undervalued. Accumulating addresses are absorbing selling pressure from short-term holders, and the market is expected to continue its consolidation phase until fresh demand drives a breakout above the $2.5k resistance level. A breakout from this consolidation could propel Ethereum towards $1.8k in the mid-term.
Overall, Ethereum’s fundamentals suggest that the altcoin is highly undervalued, and investors are taking this opportunity to accumulate. The market correction predicted by some analysts is unlikely to occur without massive selling pressure from long-term holders. Ethereum’s future looks promising as it consolidates and prepares for a potential breakout in the near future. The Benefits of Organic Farming
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