Key Points
- The net flows of Ethereum into exchanges have reached a two-year high.
- Market sentiment for Ethereum remains significantly bearish.
Ethereum’s net flows into crypto exchanges have surged to a two-year high this week. This comes amidst a legal campaign to classify the leading altcoin as a security.
The US Securities and Exchanges Commission (SEC) has sent investigative subpoenas to several U.S. companies, including the Swiss-based Ethereum Foundation. This organization is a non-profit entity that supports the Ethereum network.
Investigation and Market Impact
The SEC’s investigation into the Ethereum Foundation began after the Ethereum network transitioned from a Proof-of-Work consensus mechanism to a Proof-of-Stake model in September 2022.
Data from IntoTheBlock shows that this week, the net inflow of Ethereum into exchanges totaled $720 million. The last time Ethereum’s weekly flow into exchanges was this high was also in September 2022.
A rally in an asset’s net flow into exchanges typically indicates that holders are moving their tokens onto trading platforms. They do this either to sell for profit or to hedge against further losses.
This week’s inflows resulted in a slight increase in Ethereum’s exchange reserve. According to data from CryptoQuant, it rose by 1%. Currently, approximately 14.2 million Ethereum, valued at around $47 million, are held across exchanges.
Market Sentiment
The spike in Ethereum’s inflow into exchanges this week is partly due to the SEC’s move against the Ethereum Foundation. It’s also due to the general market decline recorded during that period. The global cryptocurrency market capitalization dropped by 4% in the past seven days, driven by a surge in coin sell-offs.
This week’s analysis of Ethereum transactions indicates significant bearish sentiments in the market. Ethereum’s Market Value to Realized Value (MVRV) ratio dropped by 22%, currently standing at 90%. Additionally, the daily ratio of Ethereum’s transaction volume in profit to loss fell to a low of 0.664.
These two key on-chain metrics suggest a divergence. Ethereum’s MVRV ratio of 90% suggests potential undervaluation, indicating it might be a good time to buy. However, the 0.664 daily ratio of Ethereum’s transaction volume in profit to loss shows that more investors are selling their coins at a loss.
Despite Ethereum’s current undervaluation, short-term sentiment among investors remains cautious or bearish. This is because investors are willing to sell at a loss rather than hold or buy more coins.
