Should ETH investors continue to HODL or run away?

Although Bitcoin attracts a lot of interest from investors, ETH seems to have a slight edge on this. Exorbitant gas fees could be one of the reasons.

There’s no denying that investors bought it at an all-time high. However, while only 1% of ETH holders cut their losses, others continue to watch the price chart with hope but no less uncertainty.

Recently, Terra overtook Ethereum in terms of total stake value and further exacerbated investor sentiment.

Furthermore, expensive gas fees and slow transaction times on Ethereum have created opportunities for competitors to gain market share. In this regard, investment bank Morgan Stanley released a report in January 2022, noting that Ethereum’s dominant market share is likely to decline over time. However, the interesting thing is that the cows have not given up yet.

Why?

At the time of writing, ETH is down nearly 5% in the past 24 hours and trades at $2,538. After the unprecedented sell-off on February 24, ETH bulls increased their exposure to push the price up on the chart. Despite a local top at $3,024, the largest altcoin invalidated the upside as it slipped towards a week-long support at $2,591. As such, in order for the price to reach $3,500, bulls will have to break through the 3,024 and $3,205 resistance levels.

However, the chances of that happening at the moment look bleak.

The upward move after February 24 occurred along with decreasing volume. This certainly means that real profits cannot be expected unless volume recovers. Besides, the RSI at the time of writing is at 38, so there is no hope for the price to move north.

All of this suggests that ETH’s current market structure does not offer profit-taking opportunities. Oddly enough, that’s not the whole story. Several on-chain indicators clearly reveal that investors need not worry.

ETH/USD | Source: TradingView

Looking at the chart, it can be seen that the number of liquidated long orders skyrocketed on 11/22/2020. Along with that, the price dropped sharply.

What’s interesting is that after 2020, there aren’t any major long liquidation events. However, February 22, 2021 and May 19, 2021 saw a spike in the number of long liquidations. Even so, they are not even half of what they were on 11/22/2020.

Investors at this point should note that there won’t be any major long liquidation spikes after May 19, 2021. In fact, if we compare the long liquidations on February 22, 2022 with last year, it is clear that investors are looking for some big profit taking opportunities in the coming days.

ETH long liquidations | Source: CryptoQuant

Interestingly, short liquidations not only did not decrease after December 2021 but also spiked. If this metric surpasses May 29, 2021, ETH could see a rally in the future.

So HODL in this case would not be a bad decision.

ETH short liquidation | Source: CryptoQuant

What should and shouldn’t you do?

Basically, the ETH funding rate is above zero for most of 2020 and 2021. It simply means that many investors are anticipating a bullish move towards this market.

Therefore, exiting during dips may cause investors to regret it in the future.

Funding rate of ETH | Source: CryptoQuant

The number of open interest (OIs) increased exponentially after December 2020. After reaching a peak in November 2021, it has dropped by a considerable margin.

Since the beginning of 2022, open interest hasn’t had any major spikes. All of this indicates that market volatility to date is nominal relative to 2021. This is not suggestive of a bullish or bearish move. However, it revealed ETH price could go down to find strong support before recording another rally.

ETH Open Interest | Source: CryptoQuant

The outlook for ETH for the long-term market looks bright. One interesting indicator, however, is that the number of daily active addresses has not increased dramatically.

Despite the debate over the Ethereum network’s move to PoS, many investors seem reluctant to continue their journey with the largest smart contract blockchain. In fact, a lot of them have turned to rival blockchains like Solana and Avalanche.

Daily active addresses | Source: Sanbase

While the current market is giving an absolute bearish signal, it is important to know that HODL ETH could also offer the opportunity to make billions of dollars in the future.

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