Is Ethereum price forming a local top?

Ethereum (ETH) price faces struggles to surpass the $4,000 barrier. On-chain data reveals that investors appear to be capitalizing on gains, contributing to the emergence of a potential local peak. This situation can be seen in the decreasing  ETH development activity and a corresponding slowdown in active wallet addresses, suggesting a pivotal moment in the trajectory of Ethereum's price journey.

Ethereum whale activity

Data from CryptoQuant's 7-day moving average of the Taker Buy Sell Ratio reveals the relative aggressiveness of buyers versus sellers. A value above one suggests buyer dominance, while a value below one indicates aggressive selling.

The chart below reveals that the Taker Buy Sell Ratio has remained below one and has been declining sharply in recent days. This indicates that most futures traders are aggressively selling Ethereum, either for speculative reasons or to take profits. This significant drop in the metric is a bearish signal, suggesting the current downward retracement in ETH could persist if this trend continues and a local top forms.

ETH Taker Buy Sell Ratio chart

Santiment’s Network Realized Profit/Loss (NPL) indicator provides daily network-level Return On Investment (ROI) data based on a coin’s on-chain transaction volume, offering insights into market sentiment. Sharp spikes in a coin’s NPL suggest holders are selling at significant profits, while steep dips indicate holders are realizing losses, potentially signaling panic sell-offs and investor capitulation.

For ETH, the NPL indicator spiked from 36.69 million on June 10 to 1.06 billion on June 11. This positive trend suggests holders are selling at significant profits, hinting at the formation of local tops.

ETH Network Realized Profit/Loss chart

Santiment’s data of Active Addresses indicates the number of unique addresses that participate in transactions on a blockchain or cryptocurrency network within a given day. This metric is used to gauge the level of network activity and user engagement. Higher Active Addresses typically suggest increased usage and interest in the cryptocurrency, whereas lower Active Addresses mean weakening demand and diminished confidence in the cryptocurrency.

As in ETH’s case, the number of Active Addresses is decreasing constantly, from 644,950 addresses on March 20 to 450,000 addresses on June 11. This 30% fall in Active Addresses indicates weakening demand and diminished confidence in ETH.

ETH Active Addresses chart

Santiment’s Development Activity indicates project development activity over time based on a number of pure development-related events in the project's public GitHub repository.

An increase in metric typically signals ongoing efforts to maintain, innovate, and enhance the protocol, which investors and stakeholders view positively. Conversely, a decrease in the index may trigger concerns regarding the project's sustainability, innovation capacity, and community involvement over the long term.

In ETH’s case, a sharp fall in the index from 329 on May 19 to 270 on June 11 implies that Ethereum's developing activity is constantly decreasing, signals concerns regarding the project's sustainability, innovation capacity, and community involvement over the long term, which adds further credence to the bearish outlook.

ETH Development Activity chart

Analyzing the declining Taker Buy Sell Ratio, surging Network Realized Profit/Loss, dwindling Development Activity, and diminishing Active Addresses collectively implies a potential local top for Ethereum's price. Nonetheless, a shift in market sentiment fueled by positive US CPI news this Wednesday, coupled with significant institutional investment inflow into Ethereum spot ETFs, has the potential to negate the bearish outlook and propel ETH towards retesting its all-time high at $4,878.