Ethereum (Ether) has experienced significant price volatility recently, sparking debate among analysts about whether the cryptocurrency has reached a capitulation phase or if further declines are on the horizon.
Ether's MVRV Z-Score, a metric used to assess whether an asset is over or undervalued by comparing its market value to its realized value, has dropped to -0.42, a level typically associated with mass selling. CryptoQuant analyst and Alphractal founder and CEO, Joao Wedson, stated that this score indicates that Ether is undergoing a "clear capitulation process". However, Wedson cautioned that the intensity of this capitulation is less severe than that seen during the major bottoms of the 2018 and 2022 bear markets, with the lowest historical value being -0.76 in December 2018. He suggested that further downsides for ETH prices are possible before a meaningful recovery occurs.
HashKey Group senior researcher Tim Sun offered a different perspective, noting that Ethereum's MVRV Z-Score has historically been a reliable indicator for tracking subsequent market shifts, particularly in identifying bottoming zones across multiple cycles. Sun argued that Ethereum's fundamentals have not deteriorated and continue to improve across several key dimensions, based on on-chain activity, protocol evolution, and long-term ecosystem structure.
Adding to the uncertainty, a Crypto Onchain analyst noted a surge in ERC-20 token transfers as Ethereum's price declined from around $3,000 to the low $2,000s. The 14-day simple moving average (SMA-14) of total token transfers jumped from approximately 1.6 million on January 29th to 2.75 million as of February 7th, marking the highest level since August of last year. The analyst explained that this divergence, where fund flows surge even as prices fall, suggests a shift in market participant behavior. This increase in token movements may indicate investors reducing risk assets, rotating into stablecoins, or moving funds to exchanges to initiate liquidations, including potential DeFi collateral movements and forced liquidations. The analyst also noted that such acceleration in transfer activity is often observed in the late stages of a bear market, where "weak hands" are shaken out and selling pressure is absorbed over a short period. While a "blow-off" pattern in token transfer activity could signal exhaustion of selling pressure and the potential formation of a localized bottom, further volatility remains possible.
Meanwhile, on-chain data reveals a divergence in behavior among different holder sizes. CryptoQuant data indicates that mid-sized wallet holders (100-1,000 ETH and 1,000-10,000 ETH) have been reducing their positions, while larger holders (10,000-100,000+ ETH) have been accumulating more ETH. This whale accumulation suggests that institutional players may view current prices as attractive entry points.
From a technical analysis standpoint, Ethereum has broken below the 100-hourly Simple Moving Average and established a negative trend line with resistance at $2,200. Initial support is at $1,850, with significant support at $1,800.
Overall, the analysis of Ethereum's recent price action presents a mixed picture. While some indicators suggest that a capitulation phase may be underway, with the potential for further downside, other metrics point to improving fundamentals and accumulation by large holders. The surge in token transfers adds another layer of complexity, potentially signaling both risk aversion and the potential for a localized bottom. As such, it remains uncertain whether Ethereum has fully capitulated or if further price declines are in store.