The Ethereum network is experiencing one of its most active periods to date. However, this does not necessarily imply a bullish outlook. Recent on-chain data shows that the number of Ethereum token transfers has reached an all-time high, marking a significant milestone. Historical cases indicate that such signals have not always led to positive price movements.
Concerns have been raised that selling pressure has not yet eased as the volume flowing into the exchange has sharply increased.
Comparing Ethereum, 2018·2021, and the current situation?
Entering February, according to CryptoQuant data from the cryptocurrency on-chain platform, the number of Ethereum transfers reached 1.1 million on a 14-day moving average, setting an all-time high.
At first glance, this figure appears positive. It indicates that the Ethereum network is growing rapidly and being used more broadly.
However, upon closer analysis, it may not be the bullish signal many expect. Rather, it could suggest a correction phase or periodic price peaks when viewed in the context of past cases.
CryptoQuant analyst CryptoOnchain points out two periods when market peaks were formed when Ethereum network activity peaked.
On January 18, 2018, when the ICO boom peaked, the number of Ethereum transactions surged. Soon after, the ETH price plummeted from around $1,400 to below $100 by the end of the year. This decline led the entire cryptocurrency market into a two-year 'crypto winter.'
On May 19, 2021, during a period of explosive growth in DeFi and NFTs, the indicator once again reached an all-time high. Subsequently, the market reversed sharply, and the ETH price fell from $4,000 to below $2,000.
The reason is clear. When the volume of ETH movement increases, it often indicates that more investors are withdrawing funds on a large scale from their wallets. This could reflect a movement attempting to sell amid deteriorating future prospects.
"The current situation is very similar to what was observed in 2018 and 2021. While the macro environment is changing, the on-chain behavior of network participants suggests that we are entering a high-risk zone." – CryptoOnchain Analyst
This perspective is further supported by the surge in Ethereum exchange inflow (top 10) when ETH fell below $2,300 in early February.
Ethereum exchange inflow (top 10) is the total of large deposits that have come into exchanges for the top 10 transactions. A higher figure indicates that many investors are sending funds on a large scale. This primarily signals increased selling pressure and the risk of further declines.
On February 3, the indicator reached 1.3 million transactions, the highest level in a year. Two days later, ETH fell from $2,230 to below $2,100.
According to BeInCrypto analysis, for a definitive trend reversal, Ethereum must bounce back to at least $3,000. In the short term, the selling pressure may not alleviate, and ETH could further decline to the $2,000 support level.
