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Ethereum Investor’s Sentiment Plunges Despite Merge Hype – Report

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Ethereum’s upcoming transition to a proof-of-stake [PoS] system which is scheduled for Sept. 19, has been the talk of the town, causing both hype and FOMO over the last week.

And to top that, ETH co-founder Vitalik Buterin recently laid out the next steps in the roadmap for the network with monikers Surge, Verge, Purge, and Splurge.

But as per a data analytics platform Santiment, the hype has so far failed to put any positive impact on the investors’ outlook.

The study highlighted that the asset is trading in severe negative sentiment territory as traders braced for a price drop in the upcoming Federal Reserve’s Federal Open Market Committee [FOMC].

The Fed’s meeting is slated to be on 26th and 27 July this week and is expected to raise interest rates by another 75 basis points, following in the footsteps of June’s rate hike.

The report also pointed out that any price rally of the coin would be short-lived and volatility would persist for some time.

“ETH had an up and down Sunday, jumping above $1,640 before dipping back down to $1,540. The trading crowd continues to not believe the hype and is expecting prices to fall heading into the FOMC meeting. ETH should continue to stay volatile.”

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Ethereum Investor's Sentiment Plunges Despite Merge Hype - Report 2

Ethereum Held On Exchanges Hit A 4-Year Low

In a separate study by Glassnode, Ethereum held on exchanges hit a four-year low after record staking figures on Ethereum 2.0 [the network’s incoming upgrade, recently rebranded to “Consensus Layer”].

Glassnode also found that centralized exchanges [CEX] currently hold over 19 million ETHs. The latest data is a little over 20 million back in July 2018, Glassnode suggested.

The sharp decline in Ethereum held across exchanges is likely due to the increasing number of Eth staked as the network prepares for its biggest upgrade yet.

Chainalysis, a blockchain data tracking platform, also reported similar findings: “The change in ETH held on exchanges experienced the largest one-day decrease in 202 days, decreasing by 432.84k ETH to 249.58k ETH.”

In contrast to the current network, Eth 2.0 is a proof-of-stake [PoS] network where validators stake 32 Eth to verify the network’s integrity.

Crypto Market Traded In Green As Bitcoin Touched 44K Amid War FUD

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Bitcoin posted some much-awaited recovery after nearly approaching the $44k mark on 28 February 2022. This comes close on the heels of heightened negativity among investors towards the dominant coin in 16 months. Altcoins too followed a similar trajectory with many prices returning to mid-February or earlier levels.

This price surge took many traders by surprise in the backdrop of looming geopolitical tensions that were already causing market stagnancy. In fact, as rumors of war evolved into full-scaled reality, prices swiftly dropped. However, less than 24 hours after Putin’s official announcement, the market cap had managed to salvage some of its losses as it nears $2 trillion.

According to prominent data analytical platform Santiment, markets have remained hesitant and stayed in a ranging pattern for most of the past few days prior to today’s breakout. But sentiments took a deep turn to the south, as social commentary began to shift negatively, as per the report.

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Santiment in its report observed that in the past, after a week of FUD and negative posts from the crypto communities, prices tend to bounce back higher. However, the report cautioned of short-term volatility that may impact given the rapidly evolving global political environment.

Is Bitcoin bouncing back only a short term affair?

The insight also raised the close correlation to global stocks which it termed as ‘concerning’ and that drifting away from it will be a ‘great sign’. Reading along with the same, the report added,

“Any breakout away from this kind of correlation, which today was a very good early sign, is excellent as a signal for a continued breakout for BTC and the rest of crypto.”

On the other hand, some analysts continue to remain cautious about geopolitical risks despite Bitcoin [BTC] and other cryptocurrencies trading higher on Monday.

Data from Glassnode indicated that a large portion of Bitcoin held by investors at around the $60,000 price level has found new buyers at the $35,000-$38,000 price range. That hint of a possible short-term price low. Some speculators however feel that BTC could follow a similar recovery pattern given its strong correlation with the S&P 500.

Has Bitcoin ventured into an extended bear market?

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Bitcoin’s and the overall market ongoing downtrend has propelled many discussions with experts contemplating whether the king coin has forayed into the bear territory or not. One such analysis is a report published by prominent data platform Glassnode where it attempted to establish the possibility of BTC entering into a prolonged bear market using key metrics such as Net Unrealised Profit/Loss, MVRV Ratio, Short-Term Holders, etc.

The report first takes on one of the primary bear indicators i.e the Net Unrealised Profit/Loss [NUPL] which depicts the broader market profitability as a proportion of the market cap. NUPL as per the report is trading at 0.325. Noting a stark contrast to the much higher profitability values of 0.75 posted in March, and 0.68 set in October 2021.

The report then refers to previous cycles where low profitability is normal in the early to mid-phase of a bear market [orange], pointing out that based on this observation, a bear market has started in May 2021.

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Has Bitcoin ventured into an extended bear market? 7

Next, it takes into account the MVRV Ratio that helps identify periods of high, and poor investor profitability. As per the report, the current MVRV-Z stands at 0.85, signaling that the market is well within bearish territory, and bearish divergence is noted, similar to the NUPL metric mentioned above. 

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In terms of supply dynamics, the Short-Term Holders are currently holding nearly 18.3% of the Bitcoin supply [excluding coins held by exchanges]. The light red area shown in the chart below represents the proportion that is currently held at a loss, ‘and as of this week, almost the entire STH supply is underwater’, it added.

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Has Bitcoin ventured into an extended bear market? 8

Bitcoin Final verdict

Summing up the report looks into the coin volume observing that a rising, and large proportion of mature coins in some cases indicates that the asset is heading towards a bear market, a time when only the HODLers and patient accumulators remain.

Without mentioning directly Glassnode through its analysis of the on-chain metrics did indicate the possibilities of Bitcoin embarking on a prolonged downtrend but stated that ‘bulls need to step up in a big way else the probabilities favor the bears.’

Bitcoin On-Chain Statistics Show Massive Outflows; Glassnode Report Takes Deep Dive

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Bitcoin’s latest rally towards the $42k mark prompted the market to take a deep dive into the cryptocurrency’s on-chain performance. This focus on Bitcoin was evidenced in Glassnode’s latest report which talked about the spending and accumulation behavior of the world’s largest cryptocurrency. The analyzed sample space included a starting trading price at $35,326 on Monday with an intra-day high of $42,388.

The report noted that this week’s rally had been witness to some holders taking exit liquidity, thereby adding to the increased trading volume. Over $2 billion in profits were realized on-chain this week as Bitcoin broke the $42k mark to fall right back down to the $38,000 range later. During the same time, Bitcoin outflows from centralized exchanges surged to a year-to-date high.

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Bitcoin On-Chain Statistics Show Massive Outflows; Glassnode Report Takes Deep Dive 10

According to Glassnode, over 40,000 BTC were withdrawn in the time period between July 30 and August 3. The report said:

“The trend for Binance appears to have stalled and started to reverse, with a total outflow of approximately 37.5k BTC this week. Coinbase balances plateaued in June, saw a large deposit of around 30k BTC in mid-July, and this week an outflow of 31k BTC. This has largely unwound all inflows since mid-May.”

Experts believe that Bitcoin’s current price action could signal the start of a new market atmosphere. Since its fall from $60,000, Bitcoin has not been able to sustain a momentum strong enough to retrace. As it stands, bitcoin was trading at the lower end of $38,000 which may just be the support increase the cryptocurrency needs. The next hike may need to come soon as Bitcoin’s on-chain activities continued at historically low rates.

At the time of writing, Bitcoin was trading for $38,500 after a 3 percent hourly dip. The market cap was holding strong at $722.84 billion while the trading volume steadied itself at $25.19 billion.