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Ethereum Bearish Signal: Profit-Taking Transfers Spike

Hououin Kyouma 2023-06-05 21:15

On-chain data shows the Ethereum profit-taking transactions have surged recently, a sign that could be bearish for the asset’s price.

Ethereum Profit-Taking Volume Has Spiked To Highest Levels Since January

According to data from the on-chain analytics firm Santiment, a large amount of profit-taking seems to have been going on in the Ethereum market recently. The relevant indicator here is the “ratio of on-chain transaction volume in profit to loss,” which, as its name already suggests, tells us about how the profit-taking transfers currently compare with the loss-taking ones.

The indicator separates these two volumes by looking at the on-chain history of each coin being sold/moved to see what price it was last sold at. If this previous price for any coin was less than the price that it’s now being moved at again, then the metric naturally counts this sale inside the profit-taking volume.

On the other hand, the last selling price being more implies that the coin is being sold at a loss, and hence, the indicator adds its movement to the loss-taking volume.

Now, here is a chart that shows the trend in this ratio for Ethereum over the last half a year:

Ethereum Profit Taking Vs Loss

As displayed in the above graph, the Ethereum ratio between the profit and loss transaction volumes has observed an uplift during the past couple of days. The metric now has highly positive values.

Whenever the indicator has positive values, it means that the profit-taking volume is more than the loss-taking one right now. Thus, since the metric has green values currently, it would suggest that profit-taking transactions are the dominant force in the market.

During the spike in the ratio yesterday, the metric hit a peak value of 1.3, which means that there were 2.3 times as many profit-taking transfers happening on the blockchain as the loss-taking ones.

These metric values were the highest seen since back in January of this year when the rally had gone through its first leg. Historically, whenever investors have done a large amount of selling with the intent of harvesting profits, the cryptocurrency’s price has felt a bearish pressure.

This phenomenon can also be seen in the chart, as back in January the Ethereum rally slowed down its rapid upward trajectory when the profit-taking hit its peak.

When the profit-taking shot up yesterday, the price was above the $1,900 level. Since then, however, the asset has slid down below the mark, implying that the profit-taking may already be showing its impact.

Santiment believes that the ratio would have to cool back down if the price of Ethereum has to build a charge towards the $2,000 level.

ETH Price

At the time of writing, Ethereum is trading around $1,800, down 2% in the last week.

Ethereum Price Chart