Ethereum Price Analysis: Overvalued Metrics Suggest Possible Correction Amid High Buying Pressure

• Ethereum’s price has fallen by over 2% in the past week, reflecting market turbulence.
• An indicator suggests ETH may be overvalued.
• Eagerly anticipated approval for ETH ETFs from the US Securities and Exchange Commission recently came through, generating discussion among investors.

Ethereum’s recent market performance raises questions about its valuation and future potential.

Is buying pressure high?

Prior to the ETF approval, ETH experienced significant investor interest and price volatility. However, this enthusiasm waned post-approval, leading to recent downturns.

According to CoinMarketCap, ETH’s value declined by more than 2% over the past week, with the altcoin currently trading at $3,814.82 and boasting a market cap of over $458 billion. In contrast to this downturn, crypto analyst Ali tweeted that 777,000 ETH (approximately $3 billion) had been withdrawn from exchanges since the ETF approval, suggesting high buying pressure.

However, COINOTAG’s analysis of on-chain metrics presents a different narrative. Santiment data reveals a reduction in Ethereum’s exchange outflows last week. Simultaneously, its supply on exchanges expanded, indicating ongoing investor sell-offs.

The decrease in the supply held by top addresses further implies that significant stakeholders, or whales, have been selling off their ETH, highlighting the struggle to sustain its price near the $4,000 mark.

Looking forward

As selling pressure increased, a key metric turned bearish for Ethereum. Analyzing Glassnode’s data, we found that the NVT ratio (Network Value to Transactions) for Ethereum saw a sharp rise on the 1st of June.

The NVT ratio is calculated by dividing the market cap by the on-chain transaction volume in USD. A spike in this ratio suggests that ETH is overvalued, potentially pointing to an upcoming price correction.

Examining ETH’s daily chart, the MACD (Moving Average Convergence Divergence) indicator showed a bearish crossover, reinforcing the likelihood of a price decline. Conversely, the Chaikin Money Flow (CMF) and Relative Strength Index (RSI) indicated positive signs. The CMF uptick and RSI’s position above the neutral level hint at potential price growth.

Conclusion

In conclusion, while Ethereum’s recent price movements and on-chain metrics present mixed signals, the broader market sentiments remain cautious. The increase in supply on exchanges alongside whale sell-offs could suggest further bearish trends, despite some indicators pointing to potential gains. Investors should remain vigilant and consider both macroeconomic factors and on-chain data when making financial decisions regarding ETH.