Current State of Ethereum Investor Profitability
Recent data suggests that only 61% of Ethereum holders are currently in profit following a period of bearish market activity. This notable decline in profitability has sparked interest in comparing the current scenario with past bear markets to understand potential future trends.
Understanding the Historical In/Out of the Money Indicator
IntoTheBlock, a market intelligence platform, has shared insights into Ethereum investor profitability using the “Historical In/Out of the Money” indicator. This metric categorizes Ethereum (ETH) holders based on their profit, loss, or break-even status by analyzing the transaction history and average purchase price of the asset.
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To determine the state of profit, the tool compares the acquisition cost of Ethereum for each wallet with the current market price. If the current price exceeds the average purchase price, the holder is considered “in the money.” Conversely, if the current price is below the acquisition cost, the holder is categorized as “out of the money.” Holders whose acquisition cost is equal to the current market price are deemed to be “at the money.”
Trends in Ethereum Holder Profitability
The chart below illustrates the trend in the Historical In/Out of the Money indicator for Ethereum over several years.
As observed, the percentage of Ethereum addresses in profit had reached beyond 90% during the price rally earlier this year. However, with recent bearish movements, this percentage has significantly declined, currently resting at around 61%.
Generally, a high percentage of profitable investors increases the likelihood of a sell-off, as these investors may seek to capitalize on their gains. This behavior often leads to market tops. Conversely, market bottoms tend to form when a significant number of investors are at a loss, as profit-sellers have been exhausted.
Comparing with Past Bear Markets
By examining past data, we can gain insights into whether the current drop to a 61% profitability level might signal a market bottom for Ethereum. During the 2022 bear market, the profitability metric bottomed out at approximately 46%. In the more severe 2018 bear market, it dropped as low as 3%. Interestingly, the recovery period in 2019/20 saw the metric briefly dip below 10%, levels akin to those observed during the bear market lows.
Given these historical trends, if the current market downturn mirrors past mid-cycle corrections, Ethereum’s profitability ratio could potentially decline further, approaching the 46% mark seen in the last bear market.
Current Ethereum Price Analysis
As the new week begins, Ethereum’s price has dropped back to $2,300 after hovering above $2,400 over the weekend. This retracement indicates a pullback from its recent recovery efforts.
In conclusion, the ongoing bearish trend has significantly impacted Ethereum holders’ profitability. By comparing current data with past market cycles, investors and analysts can better anticipate potential future movements in Ethereum’s market behavior.
