After a sharp drop in the Ethereum (ETH) price last week, there is logically uncertainty among investors. The big question is whether the digital currency can fall further, or whether we have already seen the bottom. Joao Wedson shared an extensive on-chain analysis about this. According to him, ETH is at a crucial tipping point.
Ethereum price is in capitulation zone
According to on-chain data from Joao Wedson, CEO and founder of analytics platform Alphractal, Ethereum is currently in a so-called capitulation zone. That means many investors are panic-selling their ETH, often at a loss. It is a situation that historically often precedes a market bottom.
The analyst refers to the MVRV Z-Score, an indicator that measures whether a cryptocurrency is over or undervalued. The current score of -0.42 indicates that ETH’s market value is significantly lower than the average purchase price of investors.
However, Wedson emphasizes that it is important to put the numbers in perspective. Although the current score is low, it is still above historical lows. For example, in December 2018, the Z-Score dropped to -0.76, a level that accompanied a market low.
In addition, he states: “Capitulation is not a one-time event. It is a process involving multiple recovery attempts, false reversals and the gradual exit of weaker market participants.” According to him, the market is already under considerable pressure, but historically there is still room for further decline before a final bottom is formed.
The low Z-Score is accompanied by considerable volatility. Ethereum fell to a low of almost $1,700 last week. The price has now recovered slightly and ETH is trading just above $2,000 at the time of writing.
ETH price remains shaky, but there is hope
The situation surrounding Ethereum remains uncertain. Although indicators suggest the market is moving towards a bottom, Wedson does not rule out further declines.
Still, there may be some hope in the short term. Dutch analyst Ted points to a large amount of liquidity that is above the current Ethereum price. This mainly concerns short positions with leverage that are forced to close in the event of a rise. Such liquidations can create additional buying pressure and temporarily accelerate the price. According to him, the main liquidity zone is between $2,200 and $2,400.
If ETH manages to reclaim $2,150, it could cause an upward acceleration towards this zone, according to Ted. In the best-case scenario, that would mean an increase of almost 20 percent. This may create room for a technical recovery, even if fundamental uncertainty persists for the time being.
Source: https://newsbit.nl/is-de-storm-voor-ethereum-gaan-liggen-analist-duikt-in-de-data/
