Ethereum Dips 6% Amid Low Supply and High Profit-Taking Activity

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Ethereum: Signs of a Bearish Movement?

Ethereum (ETH) has seen some notable movements recently. The amount of available ETH has hit its lowest level since the so-called “Merge” event in September 2022. This event marked the transition of Ethereum from a Proof-of-Work (PoW) consensus mechanism to a Proof-of-Stake (PoS) network.

Scarcity of ETH supply

Despite increased costs for sending and receiving ETH over the past week, the network has “burned” a significant amount of cryptocurrency, leading to a reduction in total supply. According to data from Ultrasound.money, 31,829.06 ETH worth around 71.58 million US dollars was burned in the last week. During the same period, 16,535 ETH was newly issued.

Since the Merge, 320,870.92 ETH worth 721.68 million US dollars has been removed from circulation. At the time of publication, the supply of the leading altcoin was 120.2 million ETH.

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Market control by profit takers

At the time of publication, the network’s native coin was trading at $2,249. In conjunction with the 5% drop in Bitcoin value over the past week, the ETH value has dropped by 6% during this period. With increasing profit-taking activity, a steady decline in ETH accumulation can be observed.

Decline in network activity

An on-chain assessment of the coin’s network activity based on a seven-day simple moving average showed a decline in demand for the altcoin. Data from Santiment showed that the daily number of active addresses involved in ETH transactions has dropped by 2% over the past week.

This decline in ETH network activity coincides with the re-emergence of the bears, as the coin’s Moving Average Convergence/Divergence Indicator (MACD) readings showed. On December 12, the MACD line crossed below the trend line. This movement signaled a weakening of the coin’s upward trend, ushering in the bears.

Increase in ETH supply on exchanges

In addition to the decline in demand for the altcoin, there has been an increase in its supply on exchanges in recent days. According to data from CryptoQuant, the ETH exchange reserve has increased by 0.35% over the past week. This confirms the trend of ETH holders sending their coins to the exchange to realize profits. At the time of writing this article, the ETH exchange reserve was 14.27 million ETH.

Sources: Ultrasound.money, Santiment, CryptoQuant

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