Ethereum (ETH) On-chain Data Shows Reduced Network Activity… Short-term Downtrend Possible

Several Ethereum (ETH) on-chain indicators suggest the possibility of a short-term price correction after the cryptocurrency rose 35% in the past 30 days. ETH recently reached $4,000, raising concerns about overbought conditions. As the price reached this key resistance level, the indicators suggest that selling pressure may intensify. This implies that the price could decline before any further upward movement.

Ethereum Flashes Bearish Signals

One of the key Ethereum on-chain indicators signaling this decline is the price-daily active addresses (DAA) divergence. Simply put, the price DAA divergence shows whether the cryptocurrency's value is increasing along with user engagement. When the indicator's value is positive, it indicates that user engagement has increased, thus providing an opportunity for the price to rise further. Conversely, when the price DAA is negative, it means network activity has decreased, and therefore the uptrend may stall. According to the crypto on-chain data platform Santiment, Ethereum's price DAA divergence has dropped to -64.17%. This sharp decline indicates a decrease in the number of addresses interacting with the cryptocurrency. Considering the above conditions, ETH's price could decrease.

Additionally, BeInCrypto's coin holding time analysis also aligns with this bias. Coin holding time measures the time a cryptocurrency is held without being sold or traded. An increase in holding time generally indicates that most holders have decided not to sell. Conversely, a decrease suggests the opposite. According to the crypto on-chain data platform IntoTheBlock, Ethereum's coin holding time has decreased since December 6th. This suggests the cryptocurrency is facing selling pressure. If this trend continues, ETH's price could fall below $3,900.

ETH Price Prediction: Below $3,800?

On the 4-hour chart, Ethereum's price faced resistance at $4,073 and declined to $3,985. Additionally, the Cumulative Volume Delta (CVD) has fallen into negative territory. CVD is a technical analysis tool that provides detailed insights into the buying and selling pressure in the market. This indicator allows traders to see the net difference between the volume of buy and sell trades over a specific period. A positive CVD indicates that buying pressure is dominant, while a negative CVD suggests that selling pressure is increasing, which is the case for ETH.

If this situation persists, Ethereum's price could drop to $3,788. In a highly bearish scenario, the price could decline to $3,572. However, if the trend changes, this may not occur. Instead, the cryptocurrency could rise towards $4,500.