Ethereum ($ETH) was one of the altcoins most affected by last week's crash. on the other hand, $ETH Prices have fallen below $2,000 and data shows that on-chain network activity is increasing.
Analysts say the situation raises the possibility that the market has entered a “capacity” stage.
In the latest report, CryptoQuant analysts noted that network activity is increasing while Ethereum price is falling. This rally raised the possibility of further selling pressure.
“Transfers of ERC-20 tokens surged as the price of Ethereum fell from about $3,000 to about $2,000. The 14-day moving average (SMA-14) of total token transfers increased from about 1.6 million on the 29th of last month to 2.75 million as of the 7th of this month, reaching its highest level since August of last year.”
Analysts say the situation in Ethereum is a classic mismatch phenomenon in which a sudden increase in money movement on the network coincides with a drop in price, indicating a serious shift in investor behavior.
Analysts explained that the spike in token activity “could be due to investors liquidating risky assets and converting them to stablecoins during price declines, or moving funds to exchanges for liquidation.”
Analysts noted that this negative situation may actually be a good sign for Ethereum, saying that increased token transfer activity may indicate the exhaustion of excessive selling pressure and the formation of a local bottom, but the possibility of further volatility should also be considered.
Probably a correction signal!
Additionally, CryptoQuant analyst Amr Taha said: $ETH Funding rates are overheating, suggesting a possible correction.
According to the analyst, BitMEX's Ethereum funding rate has become significantly positive and has entered an overheating phase. in contrast, $ETH Binance’s funding rate has moved from negative to neutral.
The analyst notes that historically high funding rates due to overleverage do not suggest a sustained upward trend and have increased the risk of a short-term correction.
“meanwhile $ETH Funding for BitMEX experienced a very positive spike, while funding for Binance, which was negative, became neutral. ”
Historically, strong positive financing through leverage has not supported sustained upside and has instead increased the likelihood of sharp corrections.
*This is not investment advice.
