Ether (ETH) price nosedived below $1,100 in the early hours of June 14 to prices not seen since January 2021. The downside move marks a 78% correction since the $4,870 all-time high on Nov. 10, 2021.
More importantly, Ether has underperformed Bitcoin (BTC) by 33% between May 10 and June 14, 2022, and the last time a similar event happened was mid-2021.
ETH/BTC price at Binance, 2021. Source: TradingView
Even though Bitcoin oscillated in a narrow range two weeks before the 0.082 ETH/BTC peak, this period marked the “DeFi Summer” peak when the Ethereum network’s total value locked (TVL) catapulted to $93 billion from $42 billion two months earlier.
What’s behind Ether’s 2021 underperformance?
Before jumping to conclusions, a broader set of data is needed to understand what led to the 31% correction in the ETH/BTC price in 2021. Looking at the number of active addresses is a good place to start.
Ethereum network daily active addresses, 7-day average. Source: CoinMetrics
Data shows steady growth in active addresses, which increased from 595,620 in mid-March to 857,520 in mid-May. So, not only did the TVL growth take investors by surprise, but so did the number of users.
The 31% Ether underperformance versus Bitcoin back in June 2021 reflected a cool-off period after unprecedented growth in the Ethereum ecosystem. The consequence for Ether’s price was devastating, and a 56% correction followed that DeFi Summer.
Ether/USD price at Coinbase, 2021. Source: TradingView
One must compare recent data to understand whether Ether is heading to a similar outcome. In that sense, those who waited for the 31% miss versus Bitcoin’s price bought the altcoin at a cycle low near $1,800 on June 27, 2021, and the price increased 83% in 50 days.
Is Ether flashing a buy signal right now?
This time, there is no DeFi Summer and before this year’s 33% negative performance versus Bitcoin, the active address indicator was already slightly bearish.
Ethereum network daily active addresses, 7-day average. Source: CoinMetrics
By May 10, 2022, Ethereum had 563,160 active addresses, in the lower range from the past couple of months. This is…
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