Is Ethereum Overrated?

While Ethereum price is struggling to break the $ 4,000 mark, other estimates suggest that Ethereum, despite being the second largest cryptocurrency, should be worth less.

ETH price chart | Source: trade view

It is also worrying that ETH investors panic at the slightest fluctuation and this is becoming increasingly worrying for the entire market.

The excessive fear of ETH investors

Against the backdrop of the turmoil in the market and the fear of investors, the statement by JPMorgan expert Nikolaos Panigirtzoglou seemed to fuel the fire even further. He recently said in a interview:

“We look at the hashrate and the number of unique addresses to understand the real value of ETH. It’s struggling to break through the $ 1,500 mark. ”

He added that current prices show that exponential growth in usage and traffic is just wishful thinking. This is largely in line with the observed real price on the chain of $ 1,410 at the time of writing.

The actual price of ETH is $ 1,410 | Source: Glassnode

But even without a major drop in prices, the market reacted to the smallest changes. On September 13, when the price fell less than 4%, nearly 84,000 ETH poured into the exchanges. Similarly, on September 17, when the market slumped nearly 5%, another 49,000 ETH were sold. The result of these panic selling was that cash outflows hit a 19-month low on September 18.

Total ETH outflow at 19-month low | Source: Glassnode

While the aforementioned sell-offs were mostly made by medium and short-term holders, various groups of long-term holders also started moving their coins.

Last active ETH coverage 2-3 years | Source: Glassnode

Can the sales trend stop?

The answer is only if investors choose to quit. The JP Morgan expert emphasized that not only Ethereum has the ability to build dApps (decentralized applications), but also other platforms such as Binance Smart Chain (BSC), Solana and Cardano. However, according to Skale Labs CEO Jack O’Holleran, Ethereum will continue to be the main dApp chain. This is because the majority of developers have been relying on Ethereum for a long time. Such statements create bullish momentum and this is reflected in the market orders. At the time of writing, buy orders exceeded sell orders by more than 31,000 ETH.

Orders to buy and sell ETH | The source: In the block

If volatility stays as low as it does now, the ETH price action looks more optimistic in the short term. Until then, investors shouldn’t react to small changes, but rather focus on maintaining blockchain dominance.

ETH NVT ratio reaches 15-month high

Rate NVT ETH | Source: Twitter

According to the data from Glass knotEthereum’s NVT ratio hits a new 15-month high, which shows that the network value is increasing in proportion to the on-chain volume transferred. The NVT ratio is defined as the ratio of network value to transaction, but its impact on the market can also depend on the market situation.

To determine the likelihood of a significant change, let’s compare ETH’s current pricing structure to that of June 2020 (the last time the NVT ratio was this high).

Source: trade view

As shown in the graph above, between June 2020 and September 2021, when the NVT ratio reached a similar range, ETH formed a fractal (the now repeating pattern). In both cases, the ETH price collapsed before the NVT rate accelerated in the charts.

After the NVT ratio hit a June 2020 high, the price consolidates in the same range for another 6 weeks before breaking out into a new ATH. So it can be speculated that similar conditions will lead ETH to another all-time high if the current price range is to be held in the next few weeks. However, the big change from June 2020 to September 2021 is the participation of the DeFi and NFT markets. In June 2020, DeFi applications began to sprout before exploding in activity and interest. At this time, the space is speculative and unsafe. Right now, DeFi is a multi-billion dollar industry as its reputation grows in 2021.

Currently, DeFi transactions dominate the Ethereum network and the volume in the chain is carried over to both traditional transactions and DeFi activities.

While the rationale for predicting a new all-time high is valid, the fractal narrative could change due to the presence of DeFi and more liquidity than ever in the Ethereum chain. Price may consolidate longer than expected or break out sooner. However, an NVT ratio representing the same data as in the past does not guarantee certain price movement to repeat history.

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