Ethereum Supply in Profit Reaches Yearly Low Despite 25% ETH Price Rebound
What to Make of Ethereum's Supply in Profit? | Credit: Derek Fenech
Key Takeaways
- Ethereum’s (ETH) supply in profit has fallen to a new yearly low.
- The ETH price bounced over 25% after its Aug. 5 bottom.
- How will Ethereum’s price perform for the rest of the year?
Ethereum’s price is up 19% year-to-date, however, it still trails behind its peers.
Even positive catalysts like the Ethereum ETF have struggled to spark a reaction. Since its launch, the investment vehicles have been mired in significant outflows , totaling over $440 million .
Despite a 25% rebound in recent weeks, Ethereum’s supply in profit has sunk to a yearly low, sparking concerns that the second-largest cryptocurrency may not be out of the woods yet.
Ethereum’s Supply in Profit Hits Yearly Low
Ethereum’s supply in profit indicator measures the proportion of the circulating supply that was purchased at a lower price than its current price, essentially tracking the number of coins in profit. As the price closes at a new all-time high, the indicator naturally approaches 100%.
Historically, periods where Ethereum’s total supply in profit exceeded 90% have typically coincided with market cycle tops.
However, this indicator often remains elevated for an extended period before the price ultimately reaches its peak. Notably, in 2017 and 2021, there were multiple instances where the indicator surpassed 90% before the eventual top.
Interestingly, as Ethereum’s price matures, its profit supply falls below 30% less frequently. This is because more holders exist from lower prices in previous market cycles, making it less likely for the indicator to drop below 30%.
For example, during the 2022 bottom, the indicator only fell to a low of 40%.
Recently, the indicator has shown a similar pattern to previous market cycles. In March, it increased above 90% twice before the ongoing price correction reached a low of 82.75%.
This move bears a striking resemblance to July 2017 and 2021, when Ethereum’s supply in profit dropped from above 90% to a low of 80% (marked by the black circles).
In both instances, this marked the final correction before the price surged to a new all-time high.
Has Ethereum Finally Bottomed?
The most likely Ethereum wave count suggests that ETH is correcting inside a long-term wave four (white) since the all-time high in Dec. 2021. The Aug. 5 bottom and ensuing 25% bounce marked the end of sub-wave C (black).
The price of Ethereum is nearly 50% below its all-time high, which is more compared to other large-cap cryptocurrencies such as Bitcoin (BTC), Solana (SOL), or BNB.
One reason for this ETH underperformance could be that Ethereum’s supply has become inflationary after the Dencun upgrade, as the low cost of transactions results in lesser token burns.
If the count is accurate, ETH will continue consolidating inside the wave four triangle before eventually breaking out.
If it does, the first target for the top of the increase is $7,100. The 1.61 external Fibonacci retracement level creates this target.
Ethereum’s weekly MACD reiterates how important the current movement is for Ethereum’s long-term trend since the indicator is at risk of falling into negative territory. In the previous market cycle, the decline below 0 (black icon) marked the start of the bear market.
Since this would likely entail the ETH price breaking down from the long-term triangle, it could mean that ETH has started a lengthy downtrend.
As of the time of writing, this seems unlikely.
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