Key Points
- Ethereum’s velocity decrease indicates long-term holders are not distributing, suggesting a bullish future.
- Metrics such as Mean Coin Age (MCA) and Mean Dollar Invested Age (MDIA) indicate Ethereum may be trading at a discount.
The Malta Digital Innovation Authority (MDIA) and Mean Coin Age (MCA) have hinted that the price of Ethereum (ETH) is significantly below its potential peak for this cycle.
Those who recently invested in this altcoin may currently be experiencing losses, however, a price increase could be on the horizon.
Understanding Ethereum’s Velocity
The term ‘velocity’ refers to the rate at which coins circulate within the cryptocurrency economy.
A surge in velocity indicates that coins are being rapidly exchanged.
However, recent analysis reveals that Ethereum’s velocity has dropped to 6.57.
This decrease suggests that long-term Ethereum holders are not currently distributing their holdings.
If they were, the price of Ethereum could have fallen much more than it has.
Metrics Indicate a Bullish Future
The current status of this metric is also an indication that market participants are confident in Ethereum’s potential for growth.
Two other metrics to consider are the Mean Coin Age (MCA) and the Mean Dollar Invested Age (MDIA).
The MDIA represents the average investment into a cryptocurrency at any given time, while the MCA indicates the average age of a purchase.
A combination of these two metrics can provide signals as to when to buy and when to sell.
Currently, both the MDIA and MCA are increasing, historically, this uptrend is a reliable indicator that prices have not yet peaked.
As a result, Ethereum’s price could be considered to be trading at a discount, which may be followed by a significant price increase.
Should these metric readings continue to rise, Ethereum could potentially reach a price of $3,800, and could even retest the $4,000 mark shortly thereafter.
Another metric to consider when determining if a cryptocurrency offers a buying opportunity is the Market Value to Realized Value (MVRV) ratio.
This ratio can indicate whether a cryptocurrency is undervalued, overvalued, or fairly valued.
At the time of writing, the 30-day MVRV ratio for Ethereum was -1.573%, meaning that any Ethereum holder deciding to sell their coins now would make an average loss of 1.573%.
Historically, this MVRV reading is favourable for accumulation.
In past bull cycles when Ethereum hit a local top, the ratio was well over 40%.
Therefore, it can be inferred that Ethereum has not yet reached half its potential for this cycle.
Historical data suggests that the price of Ethereum could reach five figures before the end of the bull market, although this is subject to unforeseen events.
