The beginning of the year brought overwhelmingly positive signals for the cryptocurrency market. The approval of spot Bitcoin ETFs opened the door for institutional players to gain appropriate exposure to the leading cryptocurrency. Additionally, Bitcoin's fourth halving event—historically a bullish signal for Bitcoin and cryptocurrencies overall—has now occurred. However, nine months later, the overall picture appears more mixed. Bitcoin faced rejection at the $70,000 level and several months later experienced a significant decline, dropping below $50,000.
Ethereum, meanwhile, was rejected at the $4,000 mark and subsequently fell to around $2,000. This price action is particularly noteworthy because Ethereum also saw the approval of multiple spot ETFs by the SEC. Are major investors, often called "whales," taking advantage of this 50% decline in ETH's value? Let's examine Ethereum's long-term situation.
Is Further Upside Still Possible for Ethereum?
The previous bull market began when Ethereum's price broke through a significant downward trendline and its institutional bias—represented by the crossover of the 9 and 18-period exponential moving averages (EMAs)—turned bullish. Following this signal, ETH successfully surpassed its 2017 all-time high (ATH) and eventually established a market top around $4,900.
In the current cycle, we observe a similar pattern emerging. During 2023, Ethereum's price broke its multi-year downward trendline, and the 9 and 18-period moving averages on the monthly chart subsequently turned bullish. Despite the severe correction that began in March, which pushed the price below these key moving averages, the overall indicator remains bullish. This suggests another wave of upward price movement is still possible.
Furthermore, the Relative Strength Index (RSI) remains far from the overbought conditions seen at previous market tops in 2017 and 2021. There is significant room for advancement before potentially encountering the downward trendline on the monthly RSI chart.
Ethereum Continues to Be Dominated by Bitcoin
Similar to Ethereum's price action against the US dollar, the ETH/BTC trading pair experienced a substantial upward breakout during the last bull market when it broke through a key downward trendline and achieved a bullish crossover of the 9 and 18-period moving averages.
However, since the market peak in late 2021, the ETH/BTC pair has been declining consistently. The price has been making lower lows and lower highs, trading below both a bearish institutional bias and a significant downward trendline. So far, all attempts to return to the trendline have resulted in strong rejection. Until these key resistance levels are broken on this pair, the second-largest cryptocurrency may struggle to demonstrate significant strength against Bitcoin.
Momentum becomes particularly powerful when the RSI breaks above its downward trendline and continues to advance. Currently, the RSI continues to decline beneath this trendline, indicating bearish momentum for the ETH/BTC pair on monthly timeframes.
Ethereum Whales Have Been Distributing Aggressively Since the 2021 Market Peak
Analyzing whale behavior—referring to entities holding substantial amounts of cryptocurrency—provides valuable insights. These operators possess capital far exceeding average investors, and their decisions significantly impact asset prices. For Ethereum, we consider whales to be addresses holding more than 10,000 ETH (approximately $25 million or more at current prices).
From 2017 to 2021, the number of addresses holding more than 10,000 ETH generally followed market cycles. These major investors typically accumulated during bull markets and distributed near market tops and throughout bear markets. However, since early 2023, these entities have demonstrated completely different behavior. They have been distributing their holdings intensively for approximately a year and a half, with no signs of this trend slowing. This creates significant selling pressure that must be countered by substantial demand if prices are to advance sustainably.
New Address Growth Has Stalled Since May
Various metrics help determine whether assets like Bitcoin and Ethereum are attracting new interest. The number of new addresses created on the Ethereum network serves as one valuable indicator. Typically, when ETH's price increases during bull markets, new investors enter the market, driving up new address creation. Conversely, during bear markets when prices decline, this metric tends to decrease.
From early 2023 until May, the number of new Ethereum addresses was increasing steadily. However, as ETH's price momentum has weakened, new address creation has struggled to maintain its upward trajectory. To regain dynamics characteristic of a bull market, Ethereum will likely need to break through the $4,000 resistance level and establish a new all-time high.
Did Ethereum Overheat During Its Return to $4,000?
The percentage of Ethereum addresses in profit recently returned to excessive levels. When this metric enters the red zone—indicating that more than 90% of holders are profitable—it typically suggests Ethereum is overheating. These levels have historically corresponded with market tops, as seen in 2016-2018 and 2021-2022.
Typically, when this metric moves decisively out of overbought territory, it tends to return to the green zone (where less than 30% of operators are profitable). Interestingly, even the severe bear market of 2022, which saw prices drop over 80%, didn't push this metric below 30%. While these data points should be interpreted cautiously, they clearly indicate that excesses had developed and are now undergoing correction.
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Key Takeaways: Ethereum's Current Position
Against the US dollar, Ethereum appears to be in a similar position to the previous bull market. The price has broken key downward trendlines, and institutional bias remains bullish. Despite these positive technical factors, Ethereum remains particularly vulnerable against Bitcoin. The ETH/BTC pair continues to trade beneath both its downward trendline and bearish 9 and 18-period moving averages. Until this dynamic changes, ETH will likely struggle to demonstrate strength, particularly against the leading cryptocurrency.
On-chain analysis indicates that Ethereum experienced a period of overheating during its return to $4,000. Additionally, since ETH encountered resistance around this level, new address creation has struggled to maintain momentum. A return of bullish volatility would likely be necessary to revive this metric to growth levels typical of bull markets. Finally, whales have adopted a distribution strategy since 2023. Unless accumulation resumes, substantial demand will be required to sustain any renewed upward price movement.
Frequently Asked Questions
What signals the start of a bull market for Ethereum?
A bull market typically begins when Ethereum's price breaks through significant downward trendlines and key moving average crossovers occur, particularly when the 9-period EMA crosses above the 18-period EMA on monthly charts. These technical indicators often coincide with improved fundamentals and increasing adoption.
Why is the ETH/BTC trading pair important?
The ETH/BTC pair measures Ethereum's performance relative to Bitcoin. When this pair is rising, it indicates Ethereum is outperforming Bitcoin; when falling, it's underperforming. This relationship helps traders understand relative strength between the two leading cryptocurrencies.
How do whale activities affect Ethereum's price?
Whales (entities holding large amounts of ETH) significantly impact price through their trading activities. When whales accumulate, it reduces available supply and can push prices upward. When they distribute, it increases selling pressure and can cause price declines.
What does the 'addresses in profit' metric indicate?
This metric shows the percentage of Ethereum addresses holding tokens at a profit. When this percentage exceeds 90%, it often indicates market overheating and potential price corrections. When it falls below 30%, it may suggest oversold conditions and potential buying opportunities.
How reliable are historical patterns in predicting Ethereum's price?
While historical patterns provide valuable context, they cannot guarantee future outcomes. Market conditions, regulations, technological developments, and macroeconomic factors constantly evolve, making each market cycle unique. Historical analysis should be combined with current fundamental and technical analysis.
What could drive renewed demand for Ethereum?
Several factors could stimulate demand, including increased institutional adoption through ETFs, successful implementation of protocol upgrades, growing decentralized application (dApp) usage, expansion of decentralized finance (DeFi), and broader cryptocurrency market recovery.