Ethereum’s Shapella Upgrade is Bullish Beacon with a Twist, According to Santiment

Ethereum recently surged past the $2,000 mark for the first time since August 14 last night. This 8-month high has traders curious whether it’s a temporary surge or the beginning of a prolonged rally, especially as Ethereum approaches its all-time high from November 2021. Santiment, the renowned crypto analytics firm, weighed in on this development and shared its insights on Ethereum’s performance.

The MVRV Factor: Warning Signs Ahead

Santiment highlights the importance of monitoring average trading returns, with Ethereum being a zero-sum trading game like any other asset. A 30-day MVRV (Market Value to Realized Value) of 15% or more serves as a danger zone, signaling a potential correction. 

As of now, Ethereum’s 30-day MVRV stands at 9.95%, which, although above 0, does not pose an immediate threat. However, it’s worth noting that the 365-day MVRV is at +29%, the highest since December 27, 2021, which raises some concerns for long-term traders.

Perpetual Contract Funding Rates: A Wild Ride

Santiment also advises keeping an eye on perpetual contract funding rates, particularly on the Deribit exchange. Over the past three months, Deribit has seen significant fluctuations between shorts and longs. With shorting currently prevalent, the firm believes more liquidations may fuel price increases.

As Ethereum crossed the $3,000 threshold, the profit vs. loss transaction ratio spiked to its highest level since January 20th. With 2.59 times as many transactions in profit compared to those in loss, Santiment interprets this as a short-term bearish signal. Historical trends indicate that heavy profit-taking can temporarily push prices down.

Shark and Whale Behavior: Mixed Messages

Evaluating shark and whale address behavior during this market cap growth phase is crucial, and Santiment focuses on addresses holding between 10 and 100k ETH. The firm’s analysis shows that:

• The 10-100 ETH tier has been profit-taking for about a month, with supply held fading slightly.
• The 100-1,000 ETH tier has experienced a noticeable drop since mid-March.
• The 1,000-10,000 ETH tier looks strong, with the supply held increasing over time.
• The 10,000-100,000 ETH tier has declined swiftly, dropping to levels unseen since October 2022.

A Slightly Disappointing Outlook, But Still Optimistic for 2023

Although more indicators point to bearishness, Santiment still maintains an optimistic outlook for Ethereum in 2023. With the successful merge just seven months ago, Ethereum’s #2 market cap status remains exciting. However, traders should anticipate volatility around the $2k level as bulls and bears battle it out. Ether currently trades at $2,119.