On-chain data shows Ethereum take-profit transactions have increased recently, a sign that could be bearish for the asset’s price.
Ethereum take profit volume has spiked to the highest levels since January
According to data from the on-chain analysis firm Holy, a lot of profit taking seems to have been happening in the Ethereum market recently. The relevant indicator here is the “gain to loss chain transaction volume ratio”, which, as the name already suggests, tells us how take-profit vs. loss-taking transfers currently compare.
The indicator separates these two volumes by looking at the on-chain history of each sold/moved coin to see what price it was last sold for. If the previous price of any coin was less than the price it is now moving at again, then the metric naturally counts this sale towards take-profit volume.
On the other hand, the last sell price that is higher implies that the coin is sold at a loss, and therefore the indicator adds its movement to the loss volume.
Now, here is a chart showing the trend in this ratio for Ethereum over the last half year:
The value of the metric seems to have been quite high in recent days | Source: Santiment on Twitter
As shown in the chart above, the Ethereum ratio between profit and loss transaction volumes has seen an increase over the past few days. The metric now has highly positive values.
As long as the indicator has positive values, it means that the take profit volume is greater than the loss volume at the moment. Therefore, given that the metric currently has green values, it would suggest that take profit trades are the dominant force in the market.
During yesterday’s ratio spike, the metric peaked at 1.3, meaning there were 2.3 times as many take-profit transfers on the blockchain as there were losses.
These metric values were the highest seen since January of this year, when the rally went through its first leg. Historically, whenever investors have made a large number of sales with the intention of making a profit, the price of the cryptocurrency has felt bearish pressure.
This phenomenon can also be seen on the chart, as in January, Ethereum’s rally slowed its rapid upward trajectory as profit-taking peaked.
When profit taking spiked yesterday, the price was above the $1,900 level. However, the asset has since slipped below the mark, implying that profit-taking may already be showing its impact.
Santiment believes that the relationship would have to cool down again if the Ethereum price is to rally to the $2,000 level.
ETH price
As of this writing, Ethereum is trading around $1,800, down 2% over the past week.
ETH hasn't moved much in the last few days | Source: ETHUSD on TradingView
Featured Kanchanara Image on Unsplash.com, Charts from TradingView.com, Santiment.net
