Ethereum’s surging trader losses: A short-term setback or an opportunity?

• Santiment observes ETH holder sensitivity to the possibility of more sell pressure.
• ETH on-chain data reveals that top addresses are shielding ETH amid whale sell pressure.

Ethereum [ETH] kicked off this week with a sharp pullback compared to the previous bullish attempt in the last week of September. However, recent observations may give insights into the current demand dynamics and where ETH is headed.

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ETH, like most other cryptocurrencies, has been experiencing a slow phase in the market. There are now concerns that the bears will regain dominance leading to capitulation.

A recent Santiment analysis highlighted the impact of those concerns as ETH holders experienced some panic selling recently. The analysis suggested that the market was still in a short-term profit-taking mood despite the surging sell pressure.

📉 #Ethereum, #ShibaInu, and #Sushiswap traders showed some mild signs of panic yesterday, and their networks showed some of the highest levels of trader loss taking (vs. profit) all year long. These are typically signs of a short-term rebound opportunity. https://t.co/lz6NsiH62o pic.twitter.com/HWzWvM5RHz

— Santiment (@santimentfeed) October 6, 2023

A few other cryptocurrencies had the same experience, including SUSHI and Shiba Inu. The post-mid-week panic among ETH holders extended the cryptocurrency’s downside to 8% from its current weekly top. ETH dipped as low as $1607 during Thursday, 5 October’s trading session.

The Santiment analysis also suggested that the dip represented an opportunity for short-term recovery. ETH exchanged hands at $1648 at press time after a 2.29% upside in the last 24 hours. This reflected the Santiment statement that the dip would represent an opportunity for short-term gains.

Source: TradingView

Based on the above price chart we see that ETH’s price action was restricted between the $1544 support and $1745 resistance bands. The recent pivot coupled with the surge in liquidity indicated by the Money Flow Index (MFI). But what do on-chain metrics reveal about the current situation?

How many are 1,10,100 ETHs worth today

Is ETH at risk of capitulation?

ETH’s declining confidence could be for one major reason. The cryptocurrency was substantially discounted from mid-July highs to its most recent lows just before mid-September.

Multiple signals have indicated the possibility of a relief rally. Instead, it has been struggling to maintain bullish momentum, an outcome that could risk capitulation.

Source: Glassnode

According to the above chart, ETH Addresses Holding at least 1,000 and 10,000 ETH, stood at a three-month low at press time. Despite these findings, the Top ETH Addresses have been growing in the last four weeks. A sign that the largest whales were still buying, thus protecting the cryptocurrency from more downside.

Source: Santiment

Capitulation is unlikely when the top addresses are still buying. This makes it quite an important metric to keep tabs on. Meanwhile, a pivot on the addresses holding at least 1,000 ETH could finally allow the bulls to experience less friction. Such an outcome could allow ETH to exist in its current low range in favor of more recovery.