Ethereum Traders Capitulate As Rally Slows Down: Why This Is Good

Keshav Verma

1 year ago

3 mins read

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On-chain data shows that Ethereum traders are capitulating following the slowdown of the rally, something that may turn out to be positive.

Ethereum Traders Are Selling At A Loss Right Now

According to data from the on-chain analytics firm Santiment, ETH investors are getting increasingly frustrated as they are now participating in significant loss-taking.

The relevant indicator here is the “ratio of daily on-chain transaction volume in profit to loss,” which, as its name already implies, compares the profit-taking volume to the loss-taking volume for any given cryptocurrency.

This metric works by going through the on-chain history of each coin being sold/transferred to see the price at which it was previously moved. If this last selling price for any coin was less than the current spot price, then that particular token is now being sold at a profit.

Naturally, the sale of this coin would count under the profit-taking volume. Similarly, the opposite type of coins would contribute towards the loss-taking volume.

Now, here is a chart that shows 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 metric is positive, it means that the profit-taking volume outweighs the loss-taking volume right now. On the other hand, negative values suggest the dominance of loss-taking in the market.

From the chart, it’s visible that many of these top assets have seen negative values of the indicator recently as the rally that began following the Grayscale news has slowed down.

Ethereum, however, stands out among these coins as the indicator’s value for the asset is significantly more negative than the likes of Bitcoin and Cardano, who are observing loss-taking volumes that are only mildly more than the profit-taking ones.

At the metric’s current value, the Ethereum investors are making loss-taking transactions at a rate nearly double that of the profit-taking ones. This difference between ETH and the other top assets would suggest that the coin traders are showing the least amount of patience.

This could be because they don’t think the cryptocurrency would continue its rally anymore, or if it does, the profits wouldn’t be as large as for some of the other altcoins, so they may be exiting here at losses to go to greener pastures.

This high amount of loss-taking could, however, actually turn out to be beneficial for Ethereum. Historically, whenever investors have participated in capitulation, rebounds in the price have become more probable.

The likely explanation behind this pattern may be the fact that investors pick up the coins that these relatively weak hands sell with a stronger conviction, who provide a better foundation for a sustainable price surge.

It remains to be seen whether Ethereum can use this capitulation to bounce off towards higher levels or if the rally will remain muted for a while longer.

ETH Price

At the time of writing, Ethereum is trading around $1,700, up 3% in the last week.

ETH has been moving sideways since the surge | Source: ETHUSD on TradingView

Featured image from Kanchanara on Unsplash.com, charts from TradingView.com, Santiment.net

Keshav Verma

Keshav is currently a senior writer at NewsBTC and has been attached to the website since June 14, 2021.

Keshav has been writing for many years, first as a hobbyist and later as a freelancer. He has experience working in a variety of niches, even fiction at one point, but the cryptocurrency industry has been the longest he has been attached to.

In terms of official educational qualifications, Keshav holds a bachelor’s degree in Physics from one of the premier institutes of India, the University of Delhi (DU). He started the degree with an aim of eventually making a career in Physics, but the onset of COVID led to a shift in plans. The virus meant that the college classes had to be delivered in the online-mode and with it came free time for him to explore other passions.

Initially only seeking to make some beer money, Keshav unexpectedly landed clients offering real projects, after which there was no looking back. Writing was something he had always enjoyed and to be able to do it for a living was like a dream come true.

Keshav completed his Physics degree in 2022 and has been focusing on his writing career since, but that doesn’t mean his passion for Physics has ended. He eventually plans to re-enter university to obtain a masters degree in the same field, but perhaps only to satiate his own interest rather than for using it as a means to find employment..

Keshav has found blockchain and its concepts fascinating ever since he started going down the rabbit-hole back in 2020. On-chain analysis in particular has been something he likes to research more about, which is why his NewsBTC pieces tend to involve it in some form.

Being of the science background, Keshav likes if concepts are clear and consistent, so he generally explains the indicators he talks about in a bit of detail so that the readers can perhaps come out having understood and learnt something new.

As for hobbies, Keshav is super into football, anime, and videogames. He enjoys football not only as a watcher, but also as a player. For games, Keshav generally tends towards enjoying singleplayer adventures, with EA FC (formerly FIFA) being the only online game he is active in. Though, perhaps due to being ultra-focused on the game, he is today a semi-pro on the EA FC scene, regularly participating in tournaments and sometimes even taking back prize money.

Because of his enthusiasm for anime and games, he also self-learned Japanese along the way to consume some of the untranslated gems out there. The skill didn’t merely remain as just a hobby, either, as he put it to productive use during his exploration for small-time gigs at the start of COVID, fulfilling a couple of Japanese-to-English translation jobs.

Keshav is also big into fitness, with agility and acceleration-related workouts making a big part of his program due to the relevance they have in football. On top of that, he also has a more traditional strength based program for the gym, which he does to maintain an overall fitness level of his body.

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