Ethereum May Experience Decline Under $1,500 Due to Wallet Activity, Yet Optimism Remains with Burn Mechanism

Ethereum (ETH) is on the verge of a notable decline beneath the $1,500 threshold, influenced by notable changes in wallet activity, as reported by the on-chain analytics platform Santiment. Although the short-term outlook remains pessimistic, there is a belief that ETH’s long-term potential could be supported by its burn mechanism.

The key metric in focus is the Mean Coin Age (MCA), which acts as a long-term gauge for evaluating the movement of Unspent Transaction Outputs (UTXOs) that have remained inactive for prolonged periods. A decreasing MCA indicates a significant movement of these long-held UTXOs.

According to the most recent data, ETH’s 90-day MCA has fallen to 41.07, reinforcing Santiment’s perspective of an imminent substantial decline. This reduction in long-dormant coins is further validated by a surge in circulation, reaching 634,000 on September 11, indicating that even UTXOs that have been inactive for just three months are now being transacted.

While previous analyses have highlighted bearish trends in ETH’s price movements, Santiment posits that more favorable conditions could follow the anticipated price drop. Nevertheless, traders are not expecting a rapid recovery, as reflected by the funding rate, which is currently at -0.003%. The funding rate is an essential metric in perpetual futures contracts, indicating the payments exchanged between traders holding long and short positions.

A negative funding rate, as observed with ETH, implies a bearish sentiment since shorts compensate longs with a funding fee, increasing the likelihood of a significant drop below $1,500 in the near term.

To mitigate these market-driven indicators, Ethereum may need to consider alternative metrics for signs of recovery. One such metric is the Ethereum burned supply, which denotes the total amount of ETH that has been incinerated since the introduction of EIP-1559 during the London Hard Fork.

Under EIP-1559, transaction fees are not allocated to miners/validators but are instead burned, thereby decreasing ETH’s supply and potentially boosting its long-term value. Although ETH has recently become inflationary, the burned supply of Ethereum has also increased to 4.25 million, providing optimism for a return to deflationary pressure and possible price profitability in the future.

In summary, Ethereum is confronted with a short-term risk of potentially falling below $1,500, driven by significant wallet activity and negative market sentiment. However, the Ethereum burn mechanism presents a hopeful outlook for the altcoin’s long-term durability and value.

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