The price of Ethereum’s native asset Ether has soared higher than $3k during an upside rally on August 7, implying that the price of Ether has hit a three-month high. While the cryptocurrency’s incredible emergence in prices has been in favour of most investors and traders, it also opens the possibility of facing a bearish backlash as well.
An on-chain indicator has predicated the downside on the soaring price of Ether. This indicator known as Percent of Addresses in Profits tracks the total per cent of Ethereum addresses in profits. The on-chain indicator reached 96.4% in the midst of the price rally.
The chief investment officer at Moskovski Capital, Lex Moskovski highlighted the metric’s ability to predict Ether’s top. Whenever the indicator crossed the 90% threshold, it implied that Ether investors were selling off securities. Moskovski added the price of Ether might remain above $3k, it’s currently high for a while.
The general optimism surrounding the London hard fork upgrade implies the trader’s intention to hold Ether. The London hard fork would increase the scarcity of the digital asset, making it more valuable against the booming demand. The software upgrade will add deflationary pressure to the Ethereum network.
The London hard fork will divide around 13,000 minted Ether tokens used to pay for miner’s gas fees into three segments. One of the three segments is the base fee that users will have to pay in order to conduct Ether-based transactions.
In addition to segmented fees, the Ethereum network is currently transitioning from the Proof-of-stake consensus mechanism to the upgraded proof-of-stake (PoS). The new PoS is faster and cheaper unlike its predecessor that was energy-intensive, and it reduces the active supply of Ether from the market.
Moskovski pointed out that traders will be better off holding Ether rather than securing interim profits. Ether is currently trading around 79.82% higher than its bottom on July 20. On-chain indicators are also pointing at the probabilities of a higher sell-off in the short term.
Ether’s rise above $3k has also pushed its relative strength index (RSI) into an overvalued area. Ether’s RSI reading is currently near 79, as reported by analysts. RSI reading above 70 thresholds is interpreted as overbought, meaning the asset should be sold. A falling wedge breakout setup infusing on the daily Ether analysis implies that the asset is nearing its target profit.