MICA Daily｜CryptoQuant Report: The Discount on Ether May Not Be a Buying Opportunity

According to a report by CryptoQuant, the price of Ether recently fell to its lowest point since 2019 but subsequently rebounded. However, compared to Bitcoin, Ether is still in a significantly discounted state, as its ETH/BTC market price's MVRV ratio has entered the "severely undervalued" range, indicating that the price of Ether has fallen too much compared to Bitcoin, which in the past has often been a signal for price rebounds. However, CryptoQuant analysts believe that the current market environment is different from before, making this undervaluation indicator no longer carry the same significance.

The reasons for Ether being undervalued include multiple fundamental factors. First, the Dencun upgrade in March 2024 is expected to lead to a decrease in transaction fees and a reduction in the amount of Ether being burned, which results in inflationary pressure reappearing and breaking the previous deflation narrative. Secondly, on-chain activity has been weak since 2021, with a decline in both transaction counts and active addresses, primarily due to Layer 2 networks siphoning off usage from the mainnet. Additionally, institutional interest is also waning, with both staked Ether and ETF holdings declining, further undermining market confidence.

Despite the poor fundamentals, Ether experienced a strong rebound after the Pectra upgrade on May 7, with a weekly increase of over 30%, far surpassing Bitcoin's 7.5%. This upgrade introduced account abstraction and improved staking mechanisms, bringing some boost to the market. However, CryptoQuant warned that even though Ether appears undervalued from a historical perspective, the current recovery path may be slower and more complicated than in the past, and the undervalued price may no longer be a buying opportunity. The main reason is that Ethereum is facing intense competition from other main chains, and users are in a state of loss.

Disclaimer: The article only represents the personal views and opinions of the author and does not represent the views and positions of the blockchain. All content and opinions are for reference only and do not constitute investment advice. Investors should make their own decisions and trades, and the author and blockchain will not bear any responsibility for any direct or indirect losses incurred by investors' trades.

Disclaimer: This article is intended to provide market information only. All content and opinions are for reference only and do not constitute investment advice, nor do they represent the views and positions of the blockchain. Investors should make their own decisions and trades, and the author and the blockchain will not be responsible for any direct or indirect losses resulting from investors' trading.