Key Insights:
- ETH/BTC MVRV ratio signals extreme undervaluation, the lowest since early 2019.
- Ethereum ETFs see $22.36M in daily outflows, led by iShares with 10,791 ETH withdrawn.
- If confirmed, ETH price breaks the wedge and targets $2,730, a 30% move from current levels.
Ethereum is trading at its lowest value against Bitcoin in five years as institutional outflows from ETH ETFs increase and on-chain activity falls. However, a breakout from a falling wedge pattern implies a potential 30% recovery, with the price heading toward the $2,730 level.
ETH/BTC MVRV Ratio Signals Undervaluation
According to the ETH/BTC MVRV ratio chart from CryptoQuant, Ethereum has entered an undervalued zone compared to Bitcoin. The MVRV ratio, which compares the market value to realized value, is now close to its lowest point since 2019.
The ETH/BTC price is approximately 0.04, and the MVRV ratio is significantly lower than its long-term moving average.
ETH gained value against Bitcoin after periods with similar MVRV conditions in 2017 and 2019. These historical lows, indicated in red on the chart, were usually turning points.
Meanwhile, nine Ethereum ETFs reported a total net outflow of -10,910 ETH, roughly $22.36 million, as per Lookonchain’s May 8 update. Remarkably, iShares (Blackrock) topped the outflows, pulling out 10,791 ETH in one day.
On the other hand, Bitcoin ETFs recorded a net inflow of +335 BTC ($33.88 million), indicating continued demand. ARK 21Shares alone contributed 567 BTC, and total holdings are now above 48,000 BTC.
These diverging flows indicate that institutional preference is currently favouring Bitcoin, at least in the short term.
User Activity Decreases Even as Protocol Improves
Ethereum’s network usage has been falling recently, according to growthepie.xyz. Weekly active addresses fell to 10.4 million, a 32.35% fall. Addresses interacting with multiple chains also declined to 592,949, down 28.76% from the previous week.
Layer 2 activity followed suit, with L2 dominance falling 28.81% to 4.76x. This dip indicates that fewer users are transacting across Ethereum-based chains or L2s, which may be because of higher fees or market indecision.
Still, protocol development continues. The latest update of Ethereum, Pectra, has been activated and provides features like smart accounts and increased data capacity.
These changes are meant to increase the adoption and performance of Layer 2 over time. Although activity is soft currently, the foundation for renewed growth may be taking shape.
Stablecoin Supply Increases, Providing Long-Term Support
Although there has been short-term price weakness and reduced engagement, Ethereum still dominates stablecoin issuance. According to Token Terminal data, Ethereum’s total stablecoin market cap has increased to over $130 billion.
The supply of stablecoins in the network has increased approximately 1,000,000 times since ETH first touched $1,400 in 2018.
This growth indicates Ethereum’s status as the primary platform for stablecoin transactions. Even when prices were falling, as in 2019 or early 2023, stablecoin issuance was robust. This indicates continued faith in Ethereum’s infrastructure despite ETH’s market headwinds.
The stablecoin supply provides liquidity and flexibility for users that can help to support future DeFi activity and eventual network usage recovery.
Technical Setup Points to $2,730 as ETH Breaks Multi-Month Downtrend
Ethereum has broken out of a falling wedge limiting price action since early January. From the daily chart, ETH is now trading around $2,076 after breaking above the upper boundary of the pattern.
The breakout could see ETH rally 30% to retrace 50% of the wedge’s previous decline, with a target of around $2,730. The MACD indicator reflects a change in momentum, crossing over to positive territory, and the accumulation/distribution line is on the rise, suggesting increased interest.
Disclaimer
This article is for informational purposes only and provides no financial, investment, or other advice. The author or any people mentioned in this article are not responsible for any financial loss that may occur from investing in or trading. Please do your research before making any financial decisions.
