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Ethereum: Correction may begin soon

The successful London hard fork allowed Ethereum to rise above $3,000 for the first time since mid-May. Altcoin can rightfully be considered the main cryptocurrency in the second quarter of 2021. This indirectly confirms the statement of the Coinbase platform, according to which, in Q2, ETH trading volumes accounted for 26% of the total market share, while Bitcoin only 24%. This is the first time in history that a major altcoin has surpassed BTC in this indicator. As of 14:00 UTC, the asset continues to grow in value and is quoted at $3,245. However, several fundamental reasons could prevent the cryptocurrency from setting a new historical record.

The main reason for concern is the too sharp rise in the main altcoin. It was triggered by the success of Bitcoin and the impending London update. The impulsive growth of ETH/USDT quotes has caused the emergence of two factors that can become an obstacle on the way to historical highs. The first thing I want to say is the on-chain activity of Ethereum. The number of unique addresses, transaction volumes, and total activity on the ETH network does not match the current value of the asset. In other words, the sharp rise in the altcoin is due to the hype around the London update, which has multiplied the speculative audience of the cryptocurrency. As of August 11, the number of unique addresses in contact with the asset network remains the same and even acquires a downward trend. Soon, the ether will get close to an important mark, and its unsuccessful breakdown can reveal ETH's on-chain problems.

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The second problem arising from a sharp rise in the price of ether may be massive profit taking. Since ETH has grown by 28.5% in just a week, it's easy to guess that many players remained in a good plus. This is also evidenced by the MVRV indicator on the 30-day chart. The average profit of all addresses that bought ether during this time period is over 26%. This is an extremely high indicator for a cryptocurrency with such a capitalization in such a narrow period of time. Medium-term players can likely do one of two things: sell the asset after a successful period, then put pressure on the ETH/USDT quotes, or take profit. In the second scenario, the market will experience a local correction and a retest for the strength of the support levels at $3,050 and $2,960.

At the same time, it is impossible to exclude the possibility of the continuation of the bullish movement for some time. If the current volumes and hype are enough for the market, then Ethereum may prolong the upward movement. However, the overall situation will remain uncertain. The cryptocurrency has every chance of catching up and recovering key indicators. In this case, the coin will get off with a local correction. If this does not happen, then a combination of negative factors can aggravate the correction of the altcoin to the main support zone in the $2,700 region.

As of 14:30 UTC, the coin is quoted at $3,256 and gains a positive upward momentum of +1%. At the same time, the daily trading volumes remain at an average level, at around $30 billion. On the daily chart, the technical indicators of the altcoin indicate the continuation of the bullish movement and the overcoming of the nearest difficult levels. At a shorter distance, signs of weakening are visible, but how local and important they are will be shown by the mark at which the ether will end the trading day. If ETH manages to close above $3,200, then tomorrow we can safely storm $3,000. However, a breakdown of $3,200 could provoke a local correction and postpone the Napoleonic plans of the cryptocurrency.

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The material has been provided by InstaForex Company - www.instaforex.com