On Monday, September 11, the cryptocurrency market opened in a sea of red, bracing for a week anticipated to be rife with volatility. Crypto traders are on edge as they attempt to factor in the potential repercussions of a looming $3 billion sell-off threat by FTX, as well as the impact of upcoming CPI data. Both events are slated to unfold on September 13, adding another layer of selling pressure on the crypto market. Amid this, ETH price has plunged to its lowest level since March, bringing a decline in on-chain metrics and flashing signs of oversold sentiment for the altcoin.Â
Ethereum’s Mean Dollar Invested Age Brings Reaction
The crypto market is no new to volatility, but recent developments have impacted the Ethereum community. Ethereum’s price plummeted to $1,540, a level not seen since March 12th. While the price drop alone is enough to raise eyebrows, what’s even more interesting is the continuous dip in the mean dollar invested age of Ethereum tokens.
As per data from the on-chain analytics firm Santiment, Ethereum has seen its highest level of dormant ETH activity in more than three months. Additionally, there was a significant spike in the Major Age Consumed metric right before the market experienced a sell-off this past Monday.
Before diving into the implications of the recent market movements, it’s crucial to understand what the mean dollar invested age represents. This on-chain metric measures the average age of dollars invested in Ethereum tokens that have been held in their respective wallets. A higher mean age indicates long-term holding and investor confidence, while a lower mean age suggests frequent trading or potential investor uncertainty.
A declining mean dollar invested age in ETH indicates stagnant tokens are being moved or sold. This could mean that long-term holders are beginning to liquidate their positions, contributing to the downward pressure on Ethereum’s price. In the context of a falling market, this is generally considered a sign of capitulation.
Impact Of FTX’s Wednesday Selloff Amid ETH’s Reversal Signs
Capitulation refers to the point where investors give up on any previous gains, selling off their positions. This usually occurs in a bear market (currently for Ethereum) and is often seen as the final stage of a downward trend.
However, capitulation can also serve as a reset button for the market. After a significant sell-off, the market often becomes oversold, making it an attractive entry point for new investors or for previous investors to re-enter at a lower price.
As a result, after the sell-off, new capital may enter the ETH market, and the price may start to stabilize or even rise. While this is not guaranteed, the combination of a falling mean dollar invested age and dropping prices has historically been a setup for a potential market reversal.
As of writing, ETH price trades at $1,580, declining over 1.6% over the last 24 hours.
Legal documents from FTX suggest that the exchange intends to divest between $100 and $200 million worth of digital assets on a weekly basis. This staggered selling strategy could lead to a more tempered bearish effect on the market, as opposed to triggering an abrupt price collapse if FTX were to unload its entire portfolio in one go.
FTX’s proposed weekly liquidation in the millions is not expected to cause an immediate drop in asset values. Even if the court gives the green light by September 13, the actual sell-off may not commence right away, which could mitigate the downward pressure on Ethereum prices.
