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The Ethereum network is experiencing its most active phase. However, this should not indicate a bullish outlook, as the data on the chain recently show that Ethereum has reached a major stage with the number of transfers reaching a high record, but historically such signals have not always led to a positive price.
A sharp increase in Ethereum inflows to exchanges raises concerns that the selling pressure has not yet subsided.
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How does the current situation of Ethereum compare with 2018 and 2021?
Cryptoquant data at the beginning of February indicates that Number of Ethereum transfers-Total number of digital token conversions-calculated with an average of 14 days, reached a record high of 1.1 million.
At first glance, this number looks promising, suggesting strong growth in the network and wider adoption of Ethereum.
Deeper analysis suggests, however, that this may not be the bullish signal that many expect, and may instead mean a correction phase or even a cyclical price peak, based on historical precedents.
Cryptoquant analyst CryptoOnChain highlights two periods when increased activity on the Ethereum network signaled market tops.
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- On January 18, 2018, at the height of the ICO revolution, the number of Ethereum transactions skyrocketed, and soon after the eth collapsed from about $1,400 to less than $100 by the end of the year, causing the entire cryptocurrency market to enter a two-year “crypto boom”.
- On May 19, 2021, with the growth of DeFi and non-fungible tokens, the index reached a new record, then the market reversed sharply and eth fell from more than $4,000 to below $2,000.
The explanation seems simple, as the increase in the movement of eth often indicates that more investors withdraw money from the portfolios, often via massive transactions, and this behavior may reflect attempts to sell amid deteriorating future expectations.
“Crypto On Chain” said that the current scenario bears a striking similarity with the arrangements seen in 2018 and 2021. Although the economic environment has changed, the behavior of participants on the chain for transactions indicates that we are in a high-risk area. This is according to his statement.
This view is supported by a sharp increase in Ethereum flows to exchanges (top 10 wallets) with ETH falling below $2,300 at the beginning of February.
Measure the flow of Ethereum at exchanges (top 10) The total amount of coins from the ten largest deposits on exchanges. High values ​​indicate an increase in investors depositing large amounts at once. This often indicates increased selling pressure and the risk of further price declines.
On February 3, this indicator rose to 1.3 million, the highest level in a year. Two days later, the price of eth fell from $2,230 to below $2,100.
According to PinCrypto’s analysis, the confirmation of a trend reversal requires Ethereum to recover At least $3,000. In the short term, eth may continue to… Decline towards the support level at $2,000as sales pressure still exists.
