ETH is Dropping: Is This a Warning Signal or a Buying Opportunity?

Recent blockchain data are suggesting a concerning but need-to-be-viewed-holistically picture of Ethereum. Specifically, analysis from Glassnode reveals that currently about 40% of circulating ETH has been purchased at prices higher than the current market price. This is not uncommon, but the scale and speed of this change are signaling a notable shift in investor sentiment.

Direct Data: Where Is ETH Currently Positioned?

Ethereum’s current price is $3.11K, reflecting a correction from previous highs. From an on-chain perspective, ETH holders can be categorized into two clear groups:

• Recent investors: Those who bought in the past few months are experiencing significant losses, as they entered when prices were higher
• Long-term holders: Those who accumulated at lower prices are still in profit, creating a clear market segmentation

This divide between the two investor groups is key to understanding the current market psychology. On-chain data shows the proportion of profitable supply has decreased from 75% to 59%, a significant decline in just a few weeks.

Why Is This Development Happening?

Several factors contribute to the current situation:

Widespread market pressure: The entire crypto industry is undergoing a correction phase, and ETH is no exception. This price drop reflects overall market sentiment, not just Ethereum.

Network activity volatility: Transaction volumes on Ethereum are fluctuating, affecting fee revenue and network performance. This directly impacts token valuation.

Macroeconomic context: High-risk assets like cryptocurrencies often face pressure when the global economic environment becomes unstable.

Diminished institutional investor interest: Capital inflows from institutions are no longer as strong as in previous months, leading to a lack of support from large investors.

Comparing to the Past: Is This Normal or a Warning?

Looking back, periods where 40% of supply was in loss are not rare. However, this comparison provides valuable insights:

• 2022: The bear market saw loss rates exceeding 60%, higher than the current level
• Mid-2021: The 40% figure was similar to the accumulation phase before the market started recovering
• Reversal points: Historically, when loss rates are around 30-40%, markets often begin showing signs of recovery

Thus, recent data indicate the market is still far from the “extreme capitulation” levels seen in severe bear markets.

What Should Investors Focus On?

Instead of reacting emotionally to temporary losses, investors should adopt practical strategies:

Fundamental assessment of Ethereum:

• Continuous development progress on the network
• Number of decentralized applications (DApps) and transaction volume on the platform
• Upcoming technological upgrades that could improve performance

Personal risk management:

• Determine if the current price aligns with your buying strategy
• Consider dollar-cost averaging to reduce entry price
• Ensure your portfolio matches your risk appetite

Monitoring on-chain indicators:

• Daily transaction volume and active addresses
• Institutional capital flow into Ethereum-related products
• Long-term holder accumulation levels

Key Signals to Watch

To better understand the road ahead, investors should pay attention to:

• Institutional recovery: Institutional capital flowing back into Ethereum-based products will be a positive signal
• Network development roadmap: Major technical upgrades could positively impact token value
• Global regulation: Legal decisions in major countries may alter the market landscape
• Overall sentiment: Is the broader financial market opening new opportunities for risk assets?

What Is the Reality Here?

The fact that 40% of ETH is in loss is an important technical indicator, but not a certain predictor. It reflects a market under pressure but still far from the extremes seen in history.

ETH holders in loss may see this as a challenging phase, but also an opportunity for investors with a clear strategy. History shows that periods where most of the supply is in loss often coincide with market turning points—whether continuing to weaken or beginning to recover.

Conclusion: Understanding why Ethereum is in loss requires combining technical analysis and market psychology. As always, successful crypto investors are those who maintain their conviction, focus on fundamentals, and avoid emotional decision-making during volatile periods.