Warning: Ethereum Has Entered The 'Danger Zone' According To A Key Metric

A new report from Blockchain analytics firm Santiment finds that Ethereum ETH/USD, the world’s second biggest cryptocurrency by market cap, may be at risk of an imminent price drop.

What Happened: Ethereum, along with the rest of the crypto market, has experienced a precipitous fall since the beginning of the year. The price of ETH has come down from a high of $3,836.16 on Jan. 2 to a price of $2,632.51 on Sunday, a fall of over 30%.

Santiment notes that ETH’s Market Value to Realized Value (MVRV) over a seven-day period has been rising, and has now reached a level that may lead to profit taking, and a further drop in price.

“ETH’s MVRV 7D which measures the short-term profit/loss of holders is showing that we have entered the danger zone and reached the peak in the past three months, which historically saw short-term holders who are well in profit….take some off the table,” Santiment reports.

Also Read: Why Ethereum's Chart Is Starting To Look A Little Scary

A Bullish Potential: While an elevated MVRV value indicates an increased risk of investors liquidating their assets for gains, Ethereum dropping in price may set up for a future move higher, according to Santiment.

“A drop in price and MVRV in coming days would help make for a good reset and opportunity,” the report indicates.

In terms of price action, Santiment says traders should remain cautious, especially if Ethereum isn’t able to reclaim a key level. “Bulls better hope that resistance around $3100 – $3200 [range] breaks to establish a higher high for further continuation,” the analytics firm says. “Falling back to low $2,000s wouldn’t be pretty.”

As of Sunday afternoon, Ethereum was trading at $2,627.00 down 1.35% in the past 24 hours.