Ethereum Price Pulls Back: How to Interpret Market Dynamics?
Ethereum (ETH) has begun a pullback from long-term resistance above $2,300.
The decline in active addresses shows a decrease in market demand for ETH.
Ethereum (ETH) experienced a sizable retracement in early December, raising concerns about market dynamics. While the market structure remains solid with a bullish trend on the single-day chart, some on-chain indicators are showing rising selling pressure.
Although the deflationary nature of ETH is expected to inspire confidence among long-term holders, the expected impact of reduced ETH supply on short-term market sentiment may be limited, and prices may still fall to $2,000 or lower.
Can the current support level of $2,130 be held?
In early November, ETH price surged to $2,130 before beginning a correction. This pullback lasted nearly three weeks before ETH bulls regained control. They managed to defend the $2,000 support and later broke the local high of $2,130.
ETH spent some time consolidating in the $2,030 area on the way up before quickly climbing higher. This area has shown strong signs of support, especially as it nears the $2,000 mark.
However, the 2019 USD levels became the higher recent lows, and a break below this level would reverse the bearish trend in the single-day market structure. At press time, the RSI was just above the neutral 50 level, indicating bullish momentum.
Although OBV has declined in recent days, it is still on an upward trend.
Warning Signs These Indicators Send
The age consumption indicator has shown some notable spikes over the past two weeks, particularly the one posted on December 10, when ETH was trading at $2,340.
In the following days, the average coin age, which had been trending strongly upward, dropped significantly, indicating that large amounts of ETH had been transferred between addresses. Combined with the age of consumption, this suggests a sharp rise in selling pressure.
The increase in selling caused Ethereum price to drop to the $2,100 mark. Notably, the number of active addresses began to decline over the past week, while the MVRV ratio also hit a new high.
Profitable ETH holders choose to sell their assets to realize part of their profits. Overall, these indicators suggest that long-term investors have reason to be concerned about market dynamics.
