On-chain data shows Ethereum traders capitulating after the slowdown in the rally, something that could turn out positive.
Ethereum traders are currently selling at a loss
This is evident from data from the on-chain analytics company SanitationETH investors are becoming increasingly frustrated as they are now experiencing significant losses.
The relevant indicator here is the ‘ratio of daily on-chain transaction volume in profit and loss’, which, as the name implies, compares the profit-taking volume to the loss-taking volume for a given cryptocurrency.
This metric works by going through the history of each coin sold/transferred in the chain to see the price at which it previously moved. If this last sale price for a coin was lower than the current spot price, then that particular token will now be sold at a profit.
Naturally, the sale of this coin would count under the profit-taking volume. Similarly, the opposite type of coins would add to the loss-making volume.
Here is a chart showing the trend in this ratio for some of the top assets in the cryptocurrency sector over the past few months:
Looks like the value of the metric has been negative for most of these coins in recent days | Source: Santiment on X
When the value of this measure is positive, it means that the profit-taking volume is currently greater than the loss-taking volume. On the other hand, negative values indicate the dominance of loss taking in the market.
The chart shows that many of these top assets have seen negative readings on the indicator recently as the rally that started after the grayscale news has eased.
However, Ethereum stands out among these coins because the indicator value for the asset is significantly more negative than that of Bitcoin and Cardano, which see loss-making volumes only slightly exceed profit-taking volumes.
At the current value of the measure, the Ethereum investors are making loss-making trades at a rate nearly double that of the profit-taking trades. This difference between ETH and the other top assets could indicate that the coin traders are showing the least amount of patience.
This could be because they think the cryptocurrency will not continue its rally again, or if it does, the gains won’t be as big as for some of the other altcoins, so they may be leaving with losses here to go greener. meadows.
However, this high loss rate could actually be beneficial for Ethereum. Historically, it has become more likely when investors have participated in capitulation.
The likely explanation behind this pattern may be that investors are picking up the coins that sell these relatively weak hands with stronger conviction and that provide a better basis for sustained price appreciation.
It remains to be seen if Ethereum can use this capitulation to bounce to higher levels or if the rally will remain muted for some time to come.
ETH price
At the time of writing, Ethereum is trading near USD 1,700, up 3% over the past week.
ETH has been moving sideways since the surge | Source: ETHUSD on TradingView
Featured image of Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net