Ethereum Soars 20% in 24 Hours with Increased Trading Activity, Potentially Signalling New Market Trend

Ethereum Experiences A Sharp Little Bull Run

Ethereum recently experienced a short but sharp growth, soaring by 20% in a single day. The trading price was recorded at $2,209 at the end of those 24 hours, marking one of the biggest short-term growth spurts this year.

What Fueled the Rally?

This rally can be attributed to a significant increase in trading activity, most notably in the derivatives market. This market saw its volume rocket by 184% during this time frame according to the available data. Furthermore, Ethereum futures’ open interest also showed a noticeable rise, scaling up by 20% in the same 24 hours period. This indicates that there was a tide of new capital flowing into this market.

Indicators Point To A New Trend

A spike in open interest accompanying the price is commonly an indicator of the onset of a new trend. This means that traders are creating more long positions instead of merely covering short ones. Alongside this trend, over $265 million in short positions were closed out, providing another boost to the price’s upward trajectory.

Despite having climbed 54% over the last month, Ethereum has seen a drop of 26% during the year as a whole. However, many remain optimistic about the possibility of a recovery if the current momentum perseveres.

Ethereum’s Undervalued Status Against Bitcoin

The current Ethereum rally coincides with the ETH/BTC Market Value to Realized Value ratio facing a continuous fall. In a recent study conducted by analysts at CryptoQuant, they noted that Ethereum is at its most undervalued level compared to Bitcoin since 2019 based on the data reflected by this ratio.

CryptoQuant also posted a tweet stating that Ethereum is now significantly undervalued when compared to Bitcoin. The last time that this occurred was in 2019. Historically, this undervaluation has usually led to Ethereum outperforming Bitcoin. However, the analysts also cautioned that factors like supply pressure, weak demand, and flat activity might delay its rebound.

Understanding the MVRV Ratio

This MVRV ratio that we’ve been discussing essentially compares an asset’s market cap to its realized capitalization in order to determine whether the asset is overvalued or undervalued. It takes into account the average price at which tokens last changed hands. At present, the ETH/BTC MVRV ratio has dipped into an unusually low range of between 0.4 and 0.8. Earlier, we have seen similar low-levels precede periods of extended Ethereum dominance against Bitcoin in 2017, 2019, and 2021.

Can Ethereum Repeat Its Past Success?

Although these signals might look promising on paper, broader macro and on-chain data suggests that Ethereum’s path to past glory might not be as straightforward. Factors like rising token supply, stagnant network activity, and weak ETF performance can significantly influence Ethereum’s potential price growth.

Notably, Ethereum’s circulating supply recently broke all-time records, halting the previous deflationary trend. A combination of lower fees and declining ETH burns have contributed to a shift in its supply dynamics. Besides, the number of active addresses and DeFi activity has also plateaued. Institutional flows too, appear to be subdued, with large Ethereum ETFs like Grayscale’s ETHE witnessing substantial capital outflows.

Is Ethereum all set for Altseason?

While Ethereum’s MVRV ratio against Bitcoin appears to be at its absolute bottom currently, it’s still uncertain whether this could spark another altseason spearheaded by Ethereum. To keep the momentum going, Ethereum might need new catalysts such as approval of staking in ETH ETFs or renewed interest in DeFi.