Ethereum price exceeds $ 3,000 and is entering the “red zone” raising concerns about a sell-off

Ethereum’s native asset, Ether (ETH) passed the $ 3,000 mark in a lengthy rally on August 7, reaching a three-month high. However, the cryptocurrency’s incredible uptrend also increased its chances of a bearish reaction.

An on-chain indicator that tracks the total percentage of Ethereum addresses with profits that predicted such a bearish outlook. In detail, The so-called “Ethereum: Percent of Addresses in Profits” by Glassnode reached 96.4% in the middle of the price rally of the ETH / USD pair.

Lex Moskovski, Chief Investment Officer at Moskovski Capital, highlighted the ability of the metric to predict the maximum of Ethereum. A posteriori, Every time the Glassnode indicator crossed the 90% threshold, there was profit-taking among ether investors.

Percentage of Ethereum Take Profit directions entering the sell zone. Source: Glassnode
Ethereum price exceeds $ 3,000 and is entering the “red zone” raising concerns about a sell-off
Ethereum price exceeds $ 3,000 and is entering the “red zone” raising concerns about a sell-off

We have returned to the red zone historically linked to the local highs“said Moskovski, referring to the Glassnode chart above, but added that the price could stay near its current highs – above $ 3,000 – for a while.

The decline in supply joins the mood of HOLDing

Moskovski’s outlook indicated traders’ intentions to hold ether, largely due to the Euphoria about a software update that has increased deflationary pressure on ETH.

The optimism surrounding the London hard fork stems from the growing scarcity that should make this digital asset more valuable in the long runespecially in the face of booming demand.

The London update will split the nearly 13,000 new ether tokens issued to pay miners’ gas fees into three parts.. One of them is the base fee users pay for transactions with ETH, which the updated Ethereum protocol will now burn.

2. Before the update, the mining fees were about 30.68% of the total profit (this is the average of the 7 days before the update).

What’s more Ethereum’s ongoing transition from a proof-of-work mechanism that takes a lot of energy a faster and cheaper proof-of-stake (PoS) mechanism also reduces the active supply of ether outside the market.

Specific, The PoS mechanism allows network operators to store 32 ETH as a participation in a smart contract so that the blockchain works. In return, the protocol rewards depositors with annual returns.

26% of the Ethereum supply is tied to smart contracts. Source: Glassnode

Moskovski hinted at that Traders may find it more attractive to hold their ether than to secure interim profitsas the ETH / USD pair is now trading 79.82% above its July 20th low of $ 1,718. Yet, technical indicators also indicate a higher likelihood of a short-term sell-off.

This RSI value

Ether’s recent surge above $ 3,000 also pushed its Relative Strength Index (RSI) into an overbought zone..

The RSI enables traders to measure an asset’s trending momentum to assess its overbought and oversold conditionto. Traders interpret in simple terms a value above 70 as overbought, a signal to sell the asset. Vice versa, an RSI below 30 represents a buying opportunity due to the oversold conditions of the asset.

The daily RSI of Ether is currently 79as shown in the graphic below.

Ether’s RSI is above 70, which indicates inflated valuations. Source: TradingView.com

In the meantime, A descending wedge breakout setup brewing on the ETH daily chart has a profit target near $ 3,250. Descending wedge breakouts typically last as long as the total height between the top and bottom trend lines of the wedge.

The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph.com. Every step of investing and trading involves risk, you will need to do your own research when making a decision.

Similar Posts