Why Ethereum’s Price Might Fall Below $3,000

Recently, Ethereum (ETH) has shown signs of possibly dropping below $3,000, but it has remained resilient as bulls defend the altcoin.

Ethereum’s Growth Potential

The Market Value to Realized Value (MVRV) ratio has proven to be a reliable indicator for analyzing Ethereum. It is used to evaluate holders’ profitability and identify potential market tops or bottoms. The MVRV ratio compares the cryptocurrency’s market value to its realized value, providing insights into whether the asset is overvalued or undervalued.

When the MVRV ratio rises, it indicates that more holders are in profit. However, if it climbs to extremely high levels, it suggests that the asset might be overvalued, increasing the risk of price adjustments. Conversely, when the MVRV ratio declines, it indicates falling profitability.

If this ratio reaches extremely low levels, it suggests undervaluation, which can offer attractive accumulation opportunities for investors. For ETH, the 30-day MVRV ratio has risen to 11.89%. However, this ratio is not close to the local peaks, usually around 18% to 22%. Therefore, this development indicates Ethereum’s price has room for growth.

Besides the MVRV ratio, the Mean Dollar Invested Age (MDIA) also suggests that Ethereum might avoid further price declines. MDIA measures the average age of all tokens on the blockchain, weighted by purchase price.

An increase in MDIA indicates that tokens are becoming more stagnant, reducing the likelihood of significant price surges.

Conversely, a decrease in MDIA suggests that previously dormant tokens are on the move, indicating increased trading activity, which is the case for ETH. If this trend continues, it could enhance the chances of a rise in Ethereum’s price.

ETH Price Forecast: Could Reach $4,000 On the daily chart

Ethereum’s price has formed an inverse head-and-shoulders pattern. This pattern typically appears after a prolonged downtrend, marking a potential exhaustion point for sellers.

The pattern consists of three key parts: the left shoulder, indicating the first upward trend; the head, marking the end of the downtrend; and the right shoulder, indicating a rebound.

With ETH on an upward trajectory, the cryptocurrency could reach $4,000 in the short term. On the other hand, if selling pressure increases, this scenario might change, and ETH could drop to $3,206.

Disclaimer: This price analysis article serves as reference only and should not be construed as financial or investment advice. Before making any financial decisions, please conduct your own research and consult professionals.

Sentiment: Neutral