Ethereum price action is hovering around major swing lows despite the all-important merge network update. Analysis shows ETH discounting below $2,000.
In a May 30 tweet, Ethereum (ETH) core developer Tim Beiko confirmed that the long-awaited Proof-of-Work-to-Proof-of-Stake Ropsten testnet is expected “around June 8.” could.
Interestingly, despite the surprise bullish announcement, Ether’s price action is relatively unchanged. On May 30th there was an increase of +10%, but between May 31st and June 2nd this gain was given back. The merger, which is currently expected for August, is very likely not yet priced in, which means that traders and investors will benefit from an early entry.
It is extremely important to track data on the network
From an investment and trading perspective, cryptocurrency markets have a clear disadvantage compared to regulated markets and transparency. The stock market is full of disclosures required by law. On the exchange, a retail trader can determine how many shares are short, which institution bought (or sold) a large amount of exposure, what insiders bought or sold, and many other types of information.
Cryptocurrency markets have no such legal requirements. In fact, the public does not know whether Bitcoin (BTC) or Ethereum being bought and sold on an exchange is a true cryptocurrency or some type of domestic derivative used to provide liquidity. But there is something better than the stock market in the crypto markets, and that is on-chain data.
Network data allows investors and traders to track blockchain network activity. It can answer the questions: how much ether is going public? Are there big deals? Are there larger or smaller “whale” wallets? On-chain data can help determine whether a trader or investor should be bullish or bearish.
On-chain data measuring inflow and outflow is often used to determine whether a cryptocurrency is bullish or bearish. Inflow measurements are cryptocurrencies entering the exchange from external wallets and are often taken as a sign of incoming selling pressure. Churn measurements are cryptocurrencies that allow external wallets to exchange and are often taken as a sign of storage or accumulation.
The number of inflow transactions has been relatively flat over the past three months, with a notable decline since mid-May.
Change in inflow in 24 hours: -13.50%
Inflow 7-day change: -5.87%
Inflow 30-day change: -8.08%
Cumulative number of exchange inflows. Source: IntoTheBlock
However, the number of transaction outflows has declined since March. Furthermore, on May 12, the day of Ethereum’s last flash crash, there was a significant increase in outflows, followed by a renewed decrease in outflows.
Churn in 24 hours: +3.62%
Churn in 7 days: +8.87%
Churn after 30 days: -1.56%
The total number of outbound exchange transactions. Source: IntoTheBlock
It is important to note that since May 29, outflow has increased while inflow has decreased. This could be a bullish signal to start accumulating more money.
Also see: 3 Key Indicators Traders Use to Determine When Altcoin Season Will Begin
Ether price remains at major swing lows and oscillators are at all-time lows.
The upcoming merge event is one of the most significant in Ethereum history. It’s rare for the world’s second most valuable cryptocurrency to remain at a 200-day low and lose more than 60% of its all-time high.
Perhaps the most important and relevant details for Ethereum are the Relative Strength Index and Composite Index positions.
The weekly Relative Strength Index remains bullish but just above the last oversold level of 40. The current reading of 42.15 is the lowest since the week of March 18, 2019.
The composite index is also at near historic lows. The composite index developed by Connie Brown is essentially an RSI with a momentum indicator. This is an unbounded oscillator that can capture divergences, which the RSI cannot. The weekly composite index reading is the third lowest in Ethereum history and the lowest since the week of March 26, 2018.
Weekly ETH/USD chart. Source: Trade View
Extremely oversold levels on the weekly chart of Ethereum, rising outflows and shrinking inflows could give Ethereum investors and traders a good reason to be bullish in the near-term. However, any potential bullish reaction is becoming more likely