Ethereum’s Ether (ETH) has been lagging behind Bitcoin (BTC) in this market cycle, posing a risk for newer holders to encounter losses.
According to the latest “The Week On-Chain” newsletter by analytics firm Glassnode on May 7, speculative activity is currently playing a significant role in supporting the price of ETH.
As both Bitcoin and Ether faced downward price movements following Bitcoin’s recent halving event in April, Ethereum investors have experienced particularly challenging weeks. This period comes after Bitcoin saw its sharpest decrease since the late 2022 FTX crisis.
Glassnode noted, “While Ethereum also experienced drawdowns, its corrections have been relatively milder since hitting lows after FTX, indicating a certain robustness during market pullbacks and a general decrease in volatility across the crypto space.”
Despite this resilience, Ethereum’s most significant drawdown in this cycle reached -44%, more than double that of Bitcoin’s -21%, underlining Ethereum’s weaker performance compared to Bitcoin over the last two years and its declining ETH/BTC ratio.
Ethereum’s short-term holders (STHs), defined as those holding their coins for 155 days or less, are particularly vulnerable, with their average cost basis hovering around the $3,000 mark. The ETH price has been clinging to this level, briefly dipping below before recovering, as indicated by the data from Cointelegraph Markets Pro and TradingView.
From an MVRV (Market Value to Realized Value) perspective, which assesses the unrealized profit and loss of STHs at current prices, Glassnode indicated that a further market downturn might trigger a sell-off among these recent buyers.
The firm also pointed out the lack of selling pressure from Ethereum’s long-term holders (LTHs), despite many holding coins at profitable levels. “Observations of Spent Volume in Profit show that LTHs, particularly those who have held between six months and two years, have increased their divestments during peak market rallies,” Glassnode reported.
In summary, while the market awaits regulatory decisions in the U.S. regarding spot Ether ETFs, Ethereum’s price dynamics suggest a cautious stance among investors, with potential volatility ahead that could impact both short-term and long-term holders.