Over the past few weeks, further price consolidation was observed for most altcoins and Ethereum has been one of them. Among the various developments in the chain in the wake of its $ 3300- $ 3400 stagnation, the one observed over the last 24 hours, related to Ether’s USD transaction volumes, was significant. However, its immediate impact on the market may vary based on other factors related to the Ethereum ecosystem.
Ethereum NVT ratio hits 15-month high
Now, according to Data Glass Node, Ethereum’s NVT ratio hit a new 15-month high on the charts, indicating that the value of the network was increasing compared to the volumes transferred on the chain. The NVT ratio is defined as the ratio between the value of the network and the transactions, but its impact on the market may also depend on the state of the market.
To understand the probability of a significant change, let’s compare Ethereum’s current price structure to that in June 2020 (the last time the NVT ratio was this high).
As illustrated in the graph above, Ethereum witnessed a fractal formation between June 2020 and September 2021, when the NVT ratio reached a similar range. On both occasions, a major drop was observed for Ethereum, before the NVT ratio accelerated on the charts.
After the NVT ratio peaked in June 2020, the Ether price consolidated in the same range for 6 more weeks, before hitting a new ATH. Therefore, it can be speculated that similar conditions increase the possibility of Ether reaching another ATH level, if the current price range holds for the next few weeks.
However, a major change in the narrative between June 2020 and September 2021 is the DeFi and NFT market share. In June 2020, DeFi apps were beginning to flourish, before exploding in terms of activity and interest. It was a speculative space and there was an air of uncertainty with DeFi. Today, it is a multi-billion dollar industry as its credibility increased in 2021.
Today, DeFi transactions dominated the ETH network and the on-chain volume transferred combined both traditional transfers and DeFi activity.
How does the fractal narrative change?
While the reasoning behind a new all-time high is solid, the fractal narrative changes with the presence of DeFi, as liquidity is currently more distributed on the Ethereum chain than ever. The price may consolidate for longer than expected or break out sooner. However, the NVT relationship that shows data similar to what it had in the past is not a case of “repeating history” in terms of price movement.
This is a machine translation of our English version.