Bitcoin and Ethereum Price Analysis

2022-04-25, 05:52

Leading the market, both Bitcoin and Ethereum have had an unprecedented level of influence and growth across the cryptocurrency sector. With Bitcoin assumed to retain influence over wider market performance and Ethereum acting as a key component of thousands of protocols - it is undeniable that the valuation of the two is indicative of the market performance and sentiment at large.

A Glance at Bitcoin

Having finally drawn away from the horizontal trading pattern that ensued throughout the latter portion of 2021 and early 2022, Bitcoin has since witnessed a noticeable level of volatility, with the asset frequently trading beneath its 90-day SMA for consecutive weeks. Yet contrary to historical performance (which was somewhat depleted by geopolitical and pandemic related issues) Bitcoin has witnessed tremendous upswings in a matter of weeks.

Having concluded trading in March at a comfortable $45,843.12, Bitcoin was privy to a series of uphill climbs where it appeared to be vying to have a taste of the $50k region once again. With a brief upswing as the early portion of the month ensued, Bitcoin has since trundled along a downwards trajectory, forcing it back into the realm of $39k in what appears to be a relatively bearish valuation period marketwide.

Now trading beneath its 90-day SMA, on a surface level Bitcoin appears to be in jeopardy once again. Yet deeper metric analysis fortunately suggests otherwise.

One of the more significant metrics to focus on is entity adjusted dormancy flow (EADF). Referring to the market cap of Bitcoin over the annualised dormancy rate, EADF is often a prime indication of the health of a bull market, with the green zone of ‘heavy opportunity’ suggesting there is high relativity between the market cap and its dormancy rate, as a result the conviction is price increase - and vice versa.

For the longest period in several years, Bitcoin remains within this ‘heavy opportunity’ boundary, as shown below, thus indicating that Bitcoin is poised for a bull market and that there is considerable opportunity for price accumulation is high and that a valuation spike comparable to those demonstrated in the data below could be on the horizon for Bitcoin in the future. Yet it can be ascertained from the data below that this is a territory that likely will not be fully explored for over twelve months, making this a more long-term statement of Bitcoin’s future price potential.

Once again drawing from a long-term holding perspective, Bitcoin is now demonstrating exchange withdrawal patterns comparable to that of three other occasions. Each of these periods of time have typically denoted a bullish marketplace, with investors vying to relocate their holdings to cold storage or outside of centralised bodies for the ease of trading and accumulating profits.

Following a similar bullish-esque sentiment, whales have noticeably been accruing more Bitcoin in recent weeks. Typically, the whale purchasing pattern coincides with market valuation, when valuation is high there is often a sell off, when valuation is low typically more is slowly added to portfolios in preparation for a bull market. This current uptick in whale activity may act as a bullish sentiment and serve as a hopeful glance into a prospective flourishing market.

Ultimately, Bitcoin currently appears to be shrouded in bullish sentiments - and for good reason.

Let’s Look Into Ethereum

Ethereum has been subject to an unprecedented amount of valuation volatility in 2022. Having rode out of 2021 on a high after perusing within the $4,000 region, Ethereum has since began to slip, with the middle of January knocking Ethereum to $2,405.18, an almost 50% decrease in value from its former highs throughout December. Fortunately composing itself towards the latter end of January, Ethereum has since awkwardly teetered between $2,400 and $3,550 since then, with a majority of its time spent closer to the former and significantly beneath its 90-day SMA.

April sparked some optimism however, as for the first time since early February Ethereum finally permeated the 90-day SMA barrier and burst back into a more comfortable valuation zone. After climbing towards $3,550, Ethereum began to teeter on the edge and has progressively been shedding value in recent weeks, yet currently appears to be holding strong and attempting to trade horizontally - once again below its SMA.

Having been blasted with negativity these past few years, it comes as no surprise that the significant rise in exploits and phishing attacks have resulted in Ethereum’s name being dragged through the mud. With the infrastructure typically either Ethereum based or the Ethereum crypto relocated around the ecosystem, Ethereum has often inadvertently become involved with some of the most notorious blockchain crimes in history. Transgressing against the ‘all press is good press’ ethos of many, Ethereum has witnessed an increase in speculation and suffered valuation wise in light of some of the vicious attacks that have occurred and the protocols they have disrupted. However, with the likes of Solana also being put in jeopardy by these attacks, the heat has often been taken off of Ethereum, thus granting it some serenity amidst these trying times.

When examining the valuation of Ethereum through a metrics lens it is pivotal to reflect upon the seller exhaustion constant. The seller exhaustion constant is in essence the product of percentage supply in profit and 30-day price volatility and seeks to detect when two factors align, with these being low volatility and high losses. In recent months, the seller exhaustion constant began to steadily decline and signal either an increase in long term holding, advantageous trading, or just a general increase in volatility or decline in losses. However, the seller exhaustion constant has begun to rise once again as Ethereum has moved above its 90-day SMA, suggesting that minimal profit is being made in comparison to previous weeks. Whilst this does not implicitly indicate bearishness, a decline in profit can result in bearish sentiments amongst traders.

This bearish gloom is yet to cease however, as various critics and researchers have begun to hypothesise the potential of Avalanche to usurp Ethereum’s pole position within this quarter. Ethereum has always been accredited for its sheer number of transactions, with a reported 1.17 million transactions per day in the first quarter of 2022. However, Avalanche were reported to have racked up an impressive 74% of Ethereum’s average in Q1 alone - for the first time in its history. As a result, various researchers and traders have begun to suggest Avalanche’s ability to take Ethereum’s crown, particularly in light of implementations into the Avalanche network and its subnets to help minimise transaction fees.

It is undeniable that the current state of Ethereum appears to be primarily bearish and as a result we can anticipate potentially rocky weeks ahead in the near future.

Author：Matthew W-D, Gate.io Researcher
*This article represents only the views of the researcher and does not constitute any investment suggestions.
*Gate.io reserves all rights to this article. Reposting of the article will be permitted provided Gate.io is referenced. In all other cases, legal action will be taken due to copyright infringement.

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