Ethereum Price Pulls Back To $3,500, But MVRV Signals Uptrend Continuation Likely

A breach of the $4,000 mark for the Ethereum price has looked almost like a certainty over the past two weeks, with the altcoin hovering around $3,900 in the last few days. However, this almost-certain event took a different turn after the price of ETH suddenly succumbed to severe bearish pressure.

On Friday, August 1, the Ethereum price suffered a significant downturn, briefly falling below the $3,500 mark. While this has cast doubts on the likelihood of ETH returning above the psychological $4,000 level and perhaps reaching a new all-time high, recent on-chain indicators suggest that the “king of altcoins” might not be done just yet.

In a Friday post on the X platform, crypto analyst Burak Kesmeci said that the Ethereum price might still have something in the tank despite its struggles going into the weekend. This evaluation is based on the MVRV ratio, which measures the ratio between an asset’s market capitalization and realized capitalization.

The Market Value to Realized Value (MVRV) ratio, as the name suggests, is typically used to evaluate whether a cryptocurrency (ETH, in this case) is overvalued or not. According to on-chain analytics firm CryptoQuant, an overvalued asset usually has an MVRV ratio greater than 3.7 while a ratio below 1 indicates undervaluation.

Kesmeci explained in his post that the ETH MVRV has been in a downtrend since 2018 and may be close to breaking it. However, as shown in the chart, Ether’s MVRV recently suffered rejection at a long-term resistance level — which explains the level of profit-taking seen in the past few days.

Nonetheless, Kesmeci still expects Ethereum to still break this seven-year resistance level, considering the institutional interest being enjoyed by ETH at the moment. For instance, as the on-chain analyst duly noted, the US-based spot ETH ETFs have seen a record amount of capital inflows in the past few weeks.

As for the altcoin’s movement, Kesmeci expects the Ethereum price to resume its upward trend as long as the MVRV ratio stays above the 365-day simple moving average (white). If this remains the case, a return above $4,000 for the second-largest cryptocurrency might then come sooner rather than later.

As of this writing, the price of ETH stands at around $3,523, reflecting a 5% decline in the past 24 hours.