Ethereum Faces Price Rejection: Caution Advised Amid Market Uncertainty
The Essentials in Brief
Ethereum recently experienced a rejection at the resistance mark of $3,360, sparking speculation about the reasons for this decline. While some attribute the decline to profit-taking, on-chain metrics and the recent development of the network paint a mixed picture of market sentiments. The recent Dencun update promises lower gas fees through successful L2 solutions, but market sentiment remains cautious.
Causes of Ethereum’s Price Rejection
The price of Ethereum [ETH] hit resistance at the $3,360 mark, leading to speculation about the immediate causes. A look at the activities of ETH whales and the selling behaviour of smaller wallets suggests that profit-taking may have played a role in recent months. In particular, holders of 100k to 1 million ETH tokens have shown a tendency to accumulate during market rallies, sometimes preceding larger corrections.
Market Sentiment and On-Chain Metrics
The analysis of on-chain metrics provides a mixed picture of the current market sentiment. While the network realized gains/losses (NRPL) showed clear spikes in the first two weeks of March along with strong price increases, the overall downward trend suggests ongoing caution among market participants. On the other hand, the rise in the average age of invested dollars (MDIA) in recent months suggests that the network may be in a new accumulation phase.
The Role of the Dencun Update
The recent Dencun update represents an important step for the Ethereum network by successfully implementing L2 solutions for lower gas fees. This could have long-term positive effects on network usage and the attractiveness of Ethereum as a platform for developers and users. Despite these advancements, the immediate market reaction remains subdued, underscoring the importance of on-chain metrics and market sentiment.
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Our Assessment
The recent price rejection of Ethereum at the $3,360 mark reflects the ongoing uncertainty and mixed sentiment in the crypto market. While the Dencun update and the associated improvements for the network send positive signals in the long term, on-chain metrics indicate that caution is still advisable in the short term. Investors and traders should continue to monitor market dynamics and the development of on-chain indicators in order to make informed decisions. Despite current challenges, there is reason to hope that long-term investors may be rewarded as the network’s accumulation phase continues and the recent technical improvements fully unfold.
Sources: Santiment, AMBCrypto
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