There are technical signs that indicate a possible bearish cycle in Ethereum. Traders allow a drop to $2,000 and below.
Analytical firm Santiment warned investors about a possible further fall in the price of Ethereum. The latest report from Santinment notes that Ethereum’s 7-day market value to realized value (MVRV) ratio is in the danger zone.
“ETH’s MVRV 7D which measures the short-term profit/loss of holders is showing that we have entered the danger zone and reach the peak in the past 3 months, which historically saw short-term holders who are well in profit….take some off the table.”
MVRV is the ratio between the market capitalization and the actual capitalization of the coin. An increased MVRV indicates a high yield on the security and, therefore, probability that investors prefer to exit the asset with profit.
On the other hand, a low MVRV indicates a low yield and that the asset is undervalued or in low demand.
According to Santiment, the decline in ETH price and MVRV could be beneficial for the second largest cryptocurrency.
“A drop in price and MVRV in coming days would help make for a good reset and opportunity.”
Crypto traders also bet on the fall. They expect ETH to fall below $2200 and increase their investment in put options on Ethereum. According to CoinDesk, on March 7, traders bought more than 36,000 derivative contracts on Deribit with an expiration date of March 18. The nominal value of each contract is 1 ETH, put option holders will earn if the cryptocurrency price falls below $2200 by March 18. This type of derivative gives a buyer the right, but not the obligation, to sell the pegged asset at a predetermined price on or before a specific date. Large traders who take a long position in the spot or futures market often use this tool as insurance against short-term price declines. Options are also used to speculate and profit from changes in the value of an asset as part of more complex trading strategies. Ethereum has been in a downtrend since November and formed a $2,200 support level in January.