Ether’s 78% price recovery since July 2022 is at risk of exhaustion due to an unconvincing volume profile.
The price of Ethereum’s native token, Ether, has recovered 78% since June 2022. But this doesn’t guarantee further upside, particularly with declining trading volumes suggesting that the risk of a major correction is high.
Ether volume profile drops 90% since March 2020
A “volume profile” indicator displays trading activity across prices, with the blue indicating buying volume and the yellow indicating sell volume.
Illustration of a volume profile bar. Source: TradingView
In March 2020, when the market bottomed, Ether’s volume profile on a weekly chart showed about 160 million ETH trades across the $85–$270 price range. At the time, the selling volume was greater than the buying volume by around 4 million ETH.
But Ether buying volume regained momentum after ETH price rallied above $270 in July 2020.
Notably, between July 2020 and November 2020, the Ether volume profile displayed about 64.25 million ETH trades across the $270–$450 range, with buying volume exceeding selling volume by almost 1 million ETH.
ETH/USD weekly price chart. Source: TradingView
The price-volume trend remained largely synchronous with one another until November 2021, when ETH/USD reached its record high at around $4,950.
In other words, most traders purchased Ether as its price climbed, illustrating their confidence in the longevity of the bullish reversal that followed the March 2020 crash.
However, that confidence is missing in the 2023 Ether market rebound.
2022 ETH price bottom differs from two years ago
At first, the Ether volume profile at the beginning of it price recovery in June 2022 from $900 shows 12.50 million ETH trades, down more than 90% from March 2020.
But despite a 75% price recovery, fewer traders have been participating in Ether’s potential bottom this time around when compared with the beginning of the 2020 bull market.
What’s further concerning is the rising sell-volumes during the current ETH price rebound.
For instance, the red horizontal line in the daily chart below, dubbed the “point of control,” or POC — which represents the area with the most open trading positions — shows a net 8.21 million ETH volume of around $1,550, with sellers exceeding buyers by 170,000 ETH trades.
ETH/USD daily price chart. Source: TradingView
In other words, ETH’s ongoing price recovery might not have the legs it did in March 2020, especially when coupled with the overall volume profile decline over the past two years.
Most Ether investors are still in profit
More downside cues for Ether come from one of Ethereum’s widely monitored on-chain metrics that tracks the percentage of ETH’s circulating supply in profit.
As of March 6, about 65% of ETH was bought at a lower price. In other words, investors’ probability of securing profits remains high in the event of a significant price drop.
Ether circulating supply in profit. Source: Glassnode
Therefore, Ether price could see the real bottom if the supply in profit falls below 30% (green zone), which would reflect previous market cycles and the March 2020 bottom, as shown in the chart above.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.
Recommended Content
Editors’ Picks
US presidential election outcome could shape the future of crypto
US citizens will go to the polls to elect a new president on November 5, and their choice could be key for the future of the crypto industry and thus the price outlook for Bitcoin (BTC).
Bitcoin ETFs beat Gold ETFs with 65% gain since launch
Bitcoin ETFs have reshaped the digital asset investment landscape since their approval in January. Their total assets under management climbed over $70 billion during the weekend, placing them ahead of other investment products, including gold.
XRP eyes 10% rally amid relisting across crypto exchanges and growing institutional demand
Ripple's XRP is trading at $0.5050 up slightly by 0.2% in the past 24 hours as it struggles to sustain a move above a key symmetry triangle resistance. Meanwhile, in its recently released Q3 report, Ripple noted the rising listing and relisting of XRP across crypto exchanges and global platforms.
Ethereum Price Forecast: ETH struggles below $2,500 amid State of Michigan pension fund investment in ETH ETF
Ethereum is trading near $2,420, down about 1% on Monday, but could bounce off a key descending trendline close to the $2,258 historically high demand zone. Meanwhile, the State of Michigan pension fund revealed an investment of $11 million in ETH exchange-traded funds.
Bitcoin: New all-time high at $78,900 looks feasible
Bitcoin price declines over 2% this week, but the bounce from a key technical level on the weekly chart signals chances of hitting a new all-time high in the short term. US spot Bitcoin ETFs posted $596 million in inflows until Thursday despite the increased profit-taking activity.
Best Forex Brokers with Low Spreads
VERIFIED Low spreads are crucial for reducing trading costs. Explore top Forex brokers offering competitive spreads and high leverage. Compare options for EUR/USD, GBP/USD, USD/JPY, and Gold.