Ethereum Shows Signs of Bottoming Out Amid 30% Monthly Decline

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has shown signs of reaching its bottom, according to recent on-chain analysis. The Ethereum Cost Basis Distribution metrics have indicated an increase in supply at $1,886, rising from 1.6 million Ether to 1.9 million Ether. This surge suggests a potential short-term price floor, as investors continue to accumulate at lower levels, reinforcing support at the $1,886 price point.

The data aligns with a custom capitulation metric for ETH, which integrates Cost Basis Distribution (CBD) and Realized loss data. This metric accounts for non-linear economic pain through the application of weighted sell volumes, providing a more comprehensive view of market sentiment. Despite the current downtrend, long-term price predictions for Ethereum remain bullish. Analytical institutions maintain a positive outlook, forecasting significant price increases in the future.

Ethereum's price has been volatile, with a 30% monthly decline and a dip in the ETH/BTC ratio to 0.022, a level last seen in May 2020. The asset has struggled to maintain the $2,100 critical support area, and at the time of reporting, Ether was trading at $1,914 with daily losses increasing by 0.26%. Despite these challenges, the overall sentiment remains optimistic, with predictions of a price surge to as high as $28,700 by some analytical institutions.

User activity on the Ethereum network has been declining, signaling weakening demand for the Layer-1 (L1) blockchain. Daily active addresses and new wallet creations have fallen to their lowest levels of the year, highlighting a steep drop in on-chain engagement. This decline in network participation has intensified ETH’s inflationary pressures, with the total circulating supply surpassing 120 million ETH. In the past 30 days, 71,172 ETH valued above $135 million at current market prices have been added to the coin’s circulating supply.

The decline in activity has impacted the demand for ETH, leading to a price drop. ETH currently trades at $1,898, noting a 30% price fall over the past month. The downward trend observed in ETH’s Relative Strength Index (RSI) on the daily chart captures the weakening buying pressure among market participants. At 34.70, ETH’s RSI indicates significant selling pressure, suggesting that there is room for more price declines before the coin becomes oversold and witnesses a positive correction. If this price dip continues, ETH risks plummeting to $1,758. Conversely, if demand rallies, ETH’s price could break above $1,924 and climb toward $2,224.

Despite the current challenges, the on-chain analysis suggests that Ethereum has hit the bottom, and a potential breakout above $1,960 could signal an 11% rally toward $2,200. While the cryptocurrency's price could recover and begin performing well again, its market cap will ultimately continue to lose out in the long run. The overall sentiment remains cautiously optimistic, with investors and analysts keeping a close eye on the developments in the Ethereum network and the broader cryptocurrency market.