Bitcoin and Ethereum’s On-Chain Metrics Have Turned Bullish

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From an on-chain perspective, Bitcoin and Ethereum are flashing several buy signals.

Several on-chain measures show that purchasing pressure increases, implying that Bitcoin and Ethereum are destined for extreme volatility. These cryptocurrencies must yet clear one hurdle to restart their upward trajectory.

The Bitcoin Whales Have Returned

Bitcoin and Ethereum may be on the verge of a bullish breakout.

After plunging below $41,000 earlier, Bitcoin has made a dramatic comeback. Following the sharp decline, the top cryptocurrency was able to gain almost 3,500 points, reaching a high of $43,750 at the time of writing.

As prices fell, Santiment’s Token Age Consumed indicator saw a substantial increase in idle BTC currently moving hands in the last several hours.

Bitcoin idle tokens
Source: Santiment

This on-chain indicator is calculated by multiplying the number of coins that have recently switched addresses by the number of days since they last moved. Although the movement of old tokens is not always a leading price indication, it has contributed to recent volatility increases.

Based on previous token fluctuations, Bitcoin might see much more volatility if history repeats itself.

The behavior of whales implies that the next rise in volatility will be positive. Wallets on the network with 100 to 10,000 BTC have added more than 80,000 BTC to their holdings in the previous 24 hours, totaling $3.32 billion.

Large investors may be seeking to buy at a bargain in anticipation of an upswing, as seen by the rapid rise in upward pressure.

Even though the changes appear to favor the bulls, Bitcoin will meet significant resistance shortly. For example, 1.2 million addresses had already acquired 1.05 million BTC between $43,150 and $45,670, according to IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model.

Bitcoin supply distribution
Source: Santiment

As prices seek to move further, limiting the upward pressure, these holders may be attempting to break even on their underwater holdings. Therefore, only a significant daily candlestick close above this supply barrier may herald the start of a new rally.

The IOMAP cohorts, on the other hand, show that the most substantial support wall beneath Bitcoin is located between $41,830 and $43,000. Around this price level, around 760,000 addresses own almost 430,000 BTC. Thus, slicing through this demand zone might result in a drop to $39,000, as there is no other region of interest to keep prices from dropping.

Ethereum appears to be undervalued

The amount of Ethereum tokens held on cryptocurrency exchanges is steadily decreasing. Over 1.35 million ETH has been drained from trading platforms in the previous month alone, indicating a 6.63 percent drop.

Ethereum supply on exchnages
Source: Santiment

The falling ETH supply on well-known cryptocurrency exchange wallets bodes well for Ethereum’s price rise in the future. It technically lowers the amount of ETH that can be sold, therefore limiting the negative potential.

Furthermore, the Market Value to Realized Value (MVRV) index shows that Ethereum is now undervalued. The average profit or loss of addresses that purchased ETH in the previous month is measured by this basic index. Therefore, when the 30-day MVRV falls below 0%, a bullish impulse is likely to follow.

The 30-day MVRV ratio is now hovering at -8.6%, indicating that ETH is trading in the “opportunity zone.” The lower the MVRV ratio, the more likely the price movement will be upward.

Even though Ethereum sits on top of shaky support, transaction history suggests that it only has to clear one hurdle to restart its upward trajectory.

Ethereum MVRV ratio
Source: Santiment

Between $3,185 and $3,275, more than 1.2 million addresses have bought about 8.6 million ETH. A strong candlestick close over this resistance level may catapult ETH to fresh all-time highs of $4,000 or more.

Nonetheless, investors should keep a careful eye on the $2,900 support level, as any hints of weakness in the area might prompt market players to sell. Ethereum may plummet below $2,500 in such unusual situations.

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