Ethereum Drops 55% Yearly, Analysts See Potential Reversal

Ethereum (ETH), the second-largest cryptocurrency by market capitalization, has experienced a significant decline over the past year, with its value dropping by more than 55%. This downturn has been particularly challenging for Ethereum, which has seen its price fall from $1,892 two years ago to around $1,560, marking a 17% decrease. In contrast, Bitcoin (BTC) has surged from approximately $41,000 to $82,127, an increase of nearly 100%. Other altcoins like Solana (SOL) have also shown resilience, reaching a new all-time high earlier this year.

Despite the challenging market conditions, seasoned crypto analyst Ali Martinez suggests that Ethereum may have already gone through its capitulation phase for this market cycle. Martinez points to Ethereum’s Entity-Adjusted Dormancy Flow, an on-chain metric that compares the market cap to the dormancy of ETH being moved, adjusted for unique entities. This metric has recently dropped below one million, historically indicating a macro bottom zone. This suggests that Ethereum might be undervalued and that long-term holders are less inclined to sell, potentially signaling that sentiment is low and capitulation may have occurred. Smart money might be accumulating at current levels, anticipating a near-term reversal.

If Ethereum follows historical trends, it may be approaching a momentum reversal. Crypto trader Merlijn The Trader suggested that Bitcoin Dominance (BTC.D) is nearing a peak, which could shift capital into altcoins and trigger a short-term rally. At the time of writing, BTC.D stands around 63.5%. A potential pivot by the US Federal Reserve toward quantitative easing (QE) could inject fresh liquidity into the market, possibly sparking a mini altcoin rally.

While there are multiple signs that Ethereum may be close to bottoming out, some indicators suggest that there could be continued weakness for the digital asset before any meaningful momentum shift. Martinez warned that Ethereum could fall as low as $1,200 if the current sell-off continues. Further, ongoing capital outflows from US-based spot Ethereum exchange-traded funds (ETF) remain a concern for the asset’s short-term outlook. However, crypto analyst NotWojak recently noted that Ethereum may be on the verge of a breakout, with a potential upside target of $1,835. At press time, Ethereum is trading at $1,557, down 2.3% in the past 24 hours.