On-Chain Analysis- Why Ethereum is Bullish?


Ethereum is currently showing some very strong moves in the market and this is being seeing as a bull trend in the making. Price action as seen in the chart above, we can see ETH/USDT flipping $2800 level into support and is heading towards the psychological resistance of $3000 now.

So let us now refer to Ethereum’s On-chain activity to know why this bullish scenario is playing out as well as gauge investors sentiment.

Bitcoin Futures Open Interest Leverage Ratio

In the current on-going year, the market has not seen a huge capitulation candle or what some traders would refer as a ‘Leverage flush’- an event where there is huge red candle to the downside, wiping out all leverage positions, some even as low as 2.5x

What is rather taking place currently is a slower de-risk of open interest. In the prior market dumps witnessed in May, September and then last in December, they could be seen as forced liquidations of open positions. After that, there has been no quick forced out of traders from their open positions. This is conclusive, as we have seen price go in a downtrend, but in a slow bleed fashion.

Going back to the COVID crash of 13th March, we saw the huge sell-off across asset class and Ethereum also saw a huge fall-off alongside Bitcoin. That was a black swan event, but a quick move to the downside, followed by a quick recovery and then a gradual uptick of prices. That has been completely missing in present trading sessions. Traders have now had ample time to close their positions and this has led to a gradual drop in Open Interest. This kind of action shows us that money is moving more into spot market rather than leverage and margin positions.

On-chain data hints that the market may not see a big capitulation event, as there are not many open long positions on leverage that will be forced out, so that’s a good news. On the flip side, price action will be choppy and more sideways as there is an area of volatility that is no more present.

Diminishing Ethereum balances on Exchanges

Exchanges have seen a huge outflow of Ethereum by investors. Even during the dips there has been huge buying by whales and transferring of Ethereum out of exchanges and maybe into a cold wallet.

Most of the selling that took place in the recent downtrend was done by the existing circulating supply of Ethereum and there was no huge spike of inflow of ETH to exchanges for selling.

This can be seen as new investors who bought the top sold their holdings in a loss, but the on-chain activity of 90D and older coins remained relatively flat. Currently exchange net position change has turned negative, showing major outflow of coins and dictating a reaccumulation phase is in progress

The above chart clearly depicts the percentage balance of Ethereum on exchanges (blue line) and it is currently in a downtrend, while price is in an uptrend.

This is typical Long-term holder pattern, where they sell an asset at the market top to book profit, but when the price starts to dip, they start buying the asset again to accumulate.

Long-Term investors are HODLing

In the chart below we can see the On-chain activity of Ethereum HODL waves. It clearly shows that most long term investors are not selling their coins. This shows a great maturity in the market and older coins not being destroyed.

Safe to say most of the recent selling was done by short-term holders as the older coins balance remain intact and continues to grow.

Ethereum: Average Coin Dormancy

This On-chain activity tells us what is the age of the coins that are being spent or moved. The uptick in coin movement was last seen in January before the correction, and then it returned back to normalcy even when the price was in an uptrend.

This is another metric that shows the bullish structure that Ethereum is creating and a spike in investor confidence.


On-chain metrics are some of the strongest data points that can be used by a trader to understand market cycles. Yes, they are very advanced in nature, but anyone who wants to be a successful trader should always find news way to educate themselves.

All of the above should be treated as educational content and not as investment advice

A huge shoutout to CoinDCX for making it possible for me to prepare such educational content for the readers and allowing me to be a part of the #CoinDCXpathbreaker program.




I make use of advanced Technical Tools and On-Chain Data to make crypto easy to understand for everyone in the crypto community. #CoinDCXpathbreaker

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Mohnish Isaac Kariappa

Mohnish Isaac Kariappa

I make use of advanced Technical Tools and On-Chain Data to make crypto easy to understand for everyone in the crypto community. #CoinDCXpathbreaker

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