Ethereum exchange inflow sources point to a spike in profit-taking

Ethereum has been one of the top gainers for the past 10 days in a row, rising over 25%. With the bullish momentum weakening, how can ETH price action hold up?

ETH price was under Ethereum bulls who did a great job bringing the price from the $1,300 level to $1,585. Even though the price of Ethereum has been trending significantly, the $1,600 resistance has halted the upward trajectory.

Ethereum Flow Soars

There are many reasons why ETH is weak.

Firstly, there has been a steady decline in active Ethereum addresses, following the spike on October 10 to lower lows on the daily chart.

Ethereum Price Active Addresses |  Source: SanBase
ETH Active Addresses | Source: SanBase

A drop in active addresses undermines market confidence from participants. That said, another worrying trend is that the number of Ethereum addresses holding 10,000+ ETH has hit a 7-month low of 1,158 addresses.

This could mean that whale entities have been making profits during the recent pump and have reduced their holdings due to weakening Ethereum price action.

Ethereum Price Source: Glassnode Alert
Source: Glassnode Alerts

Furthermore, data from Cryptoquant shows that the increase in prices is due to whale deposits on the exchange. Interestingly, the exchange inflows (mean) saw a huge increase as the Ethereum price saw an uptrend.

Ethereum Price Exchange Flow (Mean) |  Source: CryptoQuant
Exchange Inflow (Mean) | Source: CryptoQuant

The recent volatility can be thought of as a deliberate pumping event from a bear market, which may have acted as an exit move before a major decline.

Local ETH price reached the top?

On October 31, as another month ended, the percentage of ETH addresses in profit (7D MA) reached a 1-month high of 56.565%. With so many addresses in profit, traders may be encouraged to book some profit in the crypto market.

Ethereum Price Source: Glassnode Alert
Source: Glassnode Alerts

That said, the Ethereum NVT signal (7D MA) also hit a 1-month high of 1,604.988. While a high NVT signal indicates that investors are valuing the asset at a premium, it often coincides with the top of the local market.

In the case of NVT forming higher levels during bearish overextension, this could mean selling opportunities arise during periods of peak bullishness.

At press time, the price of ETH was trading at $1,585. IntoTheBlock’s in/out of money indicator suggests that a fall below $1,560, where there is 5.38 million ETH from 1.17 million addresses, could lead to some further selling.

Source: IntoTheBlock
Source: IntoTheBlock

Ethereum price action seems to be at a critical crossroads, but the invalidation of the bearish thesis could push ETH price towards the bullish target of $1,600.

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