Ethereum’s native cryptocurrency, Ether (ETH), has not performed as well as Bitcoin (BTC) in this market cycle, and new ETH holders now face the risk of losses. In its latest newsletter, “The Week On-Chain,” analytics firm Glassnode highlighted the role of speculators in supporting the price of ETH.
Both Bitcoin and Ether have experienced price declines since Bitcoin’s block subsidy halving in April. However, in recent weeks, Ether bulls have been hit hard, with BTC/USD experiencing one of its largest drawdowns since the FTX incident in late 2022. Glassnode noted that Ethereum has shown a similar drawdown pattern, but with less severe corrections compared to BTC. This indicates a certain level of resilience during pullbacks and a decrease in volatility across the digital asset space.
Although the extent of price drawdowns for ETH is decreasing, certain investor groups are now at risk of falling into negative territory with their holdings. Short-term holders (STHs) of Ether, who have held their coins for 155 days or less, have an aggregate cost basis of around $3,000. ETH/USD is currently trading at around that level, with a brief dip below it last week that was quickly bought up.
Glassnode analyzed Ethereum’s market value to realized value (MVRV) metric and suggested that a market drop could lead to panic among these short-term holders. MVRV measures the unrealized profit and loss for STHs at a given price. The slight premium in Ethereum’s STH-MVRV suggests that spot prices are very close to the cost basis of recent buyers, who may panic if the market experiences downside volatility.
In summary, Glassnode acknowledged that the market is waiting for signals from regulators in the United States regarding the fate of spot Ether exchange-traded funds (ETFs). Meanwhile, long-term holders (LTHs) of ETH appear reluctant to sell at current prices, despite many already having significant profit margins. The newsletter highlighted that LTHs increased their divestment during the all-time high rally.
It is important to note that this article does not offer investment advice or recommendations. All investment and trading decisions involve risks, and readers should conduct their own research before making any decisions.