The current market exemplifies how extreme greed can have dual consequences. On the charts, extreme fear is significantly impacting investor sentiment. The Fear & Greed Index has plummeted 7 points to an unprecedented low of 10, a threshold that has historically coincided with capitulation phases as investors seek to secure their losses. Ethereum’s on-chain metrics indicate this pressure. The MVRV-Z score (Market Value to Realized Value) has reached -0.42, suggesting that the market value is considerably lower than the realized value, resulting in holders, on average, experiencing losses. That being noted, there remains some space before reaching extremes.
The chart above indicates that Ethereum’s all-time low MVRV-Z reached -0.76 in 2018. From a technical standpoint, this indicates that although the market is under significant stress, it has not yet hit the historical levels of capitulation. Naturally, that brings ETH’s $2k level into sharp focus. But what occurs when greed begins to surpass fear? Current indicators reveal a divergence among investors from on-chain metrics, highlighting precisely why greed could pose a risk to ETH. The reasoning is straightforward: Almost 42% of holders find themselves in a losing position, highlighting the critical need to protect essential support levels. In this context, the $2k level serves as a robust psychological floor that has historically managed to keep FOMO in check.
In this context, CryptoQuant reveals an extreme positive ETH funding on BitMEX, while Binance transitions from negative to neutral, indicating an increase in leverage. In straightforward terms, speculative capital is flooding in as traders place their bets on ETH. In a significant development, Lookonchain has identified a trader who has initiated a substantial $122.3 million ETH long position using 15x leverage, which sets the liquidation price at $1,329. The trader is currently experiencing approximately 50% in unrealized gains. That being noted, the “fear” remains present. The market continues to exhibit signs of historical extreme fear, as evidenced by significant ETH ETF outflows and capitulation-driven on-chain metrics, resulting in a distinct divergence in investor positioning.
In practice, this indicates that Ethereum traders are pursuing profits in anticipation of what on-chain signals are indicating. However, with volatility maintaining a grip of fear, this divergence could unravel swiftly, placing ETH’s $2k level in jeopardy. On-chain metrics indicate a state of extreme fear, as Ethereum traders pursue short-term profits, resulting in a distinct divergence in market sentiment. Significant bullish funding on BitMEX, coupled with a $122 million 15x ETH long, indicates that speculative bets are accumulating, potentially jeopardizing the $2k threshold.