- Ethereum’s Ether has underperformed compared to Bitcoin, experiencing a peak drawdown of 44% compared to Bitcoin’s 21%.
- Short-term holders of Ethereum are particularly vulnerable, with their aggregate cost basis around the $3,000 mark, mirroring current trading prices.
- Despite potential risks, long-term Ethereum holders remain reluctant to sell, anticipating more favorable market conditions.
Ethereum’s Ether (ETH) has not fared as well as Bitcoin in the current cryptocurrency cycle, with significant price drawdowns putting new investors at risk of losses, according to a recent analysis by Glassnode in their “The Week On-Chain” newsletter dated May 7.
Market Dynamics and Ethereum’s Performance
Both Bitcoin and Ethereum have experienced downward price movements following Bitcoin’s block subsidy halving event in April. While Bitcoin saw one of its sharpest pullbacks since the late 2022 FTX crisis, Ethereum demonstrated a certain resilience, with less severe corrections.
However, Glassnode pointed out that Ethereum’s largest drawdown this cycle reached 44%, more than double that of Bitcoin’s 21% drop. This substantial decline underlines Ethereum’s relative underperformance over the past two years, also reflected in a weakening ETH/BTC ratio.
Vulnerability Among Short-Term Holders
The analysis highlighted concerns for Ethereum’s short-term holders (STHs), defined as entities that have held their coins for 155 days or less. The cost basis for these holders is currently around $3,000, which aligns closely with Ethereum’s recent trading prices. This proximity to their cost basis means any further market downturn could quickly push these investors into a loss, potentially triggering a sell-off in an attempt to minimize losses.
Glassnode’s market value to realized value (MVRV) metric for these short-term holders indicates a slight premium at current prices. This suggests that any negative volatility could lead to panic selling among recent buyers, who are near their break-even point.
Long-Term Holders’ Outlook
Despite the market’s ups and downs, Ethereum’s long-term holders appear to be in a waiting phase, showing no rush to cash out. These investors, who have held their assets for longer periods, seem to be looking for more lucrative profit-taking opportunities, despite having already seen healthy returns on their investments.
Glassnode also observed a cautious sentiment prevailing in the market, with all eyes on U.S. regulators regarding the approval of spot Ether ETFs. The decision could have significant implications for Ethereum’s market dynamics and investor behavior moving forward.
