Warning sign for ETH price? Ethereum volume profile is down 90% since March 2020

The price of Ethereum’s native token, Ether (ETH), has recovered 78% since June 2022. But this does not guarantee further growth, especially with declining trading volumes, suggesting that the risk of a major correction is high.

Ether Volume Profile Drops 90% Since March 2020

The volume profile indicator shows trading activity by price, with blue indicating buying volume and yellow indicating selling volume.

Illustration of a volume profile bar. Source: TradingView

In March 2020 when the market bottomed out, The Ether volume profile on a weekly chart showed about 160 million ETH trades in the $85–$270 price range. At that time, selling volume was greater than buying volume by about 4 million ETH.

But Ether buying volume regained momentum after the price of ETH rose above $270 in July 2020.

In particular, between July 2020 and November 2020, Ether’s volume profile shows about 64.25 million ETH trades in the $270–$450 range, with buying volume exceeding selling volume by almost 1 million ETH.

ETH/USD weekly price chart. Source: TradingView

The price-volume trend remained largely in sync with each other until November 2021, when ETH/USD reached its all-time high around $4950.

In other words, most traders bought Ether while its price was rising, illustrating their confidence in the longevity of the bullish reversal that followed the March 2020 crash.

However, this confidence is lacking in Ether’s market recovery in 2023.

ETH’s 2022 price floor differs from two years ago

Initially, Ether’s volume profile at the start of its June 2022 price recovery from $900 showed 12.50 million ETH transactions, down more than 90% from March 2020.

But despite a 75% price recovery, fewer traders have participated in Ether’s potential bottom this time compared to the start of the 2020 bull market.

What is further worrying is the increasing selling volume during the current ETH price recovery.

For example, the red horizontal line in the daily chart below, called the “point of control” or POC—which represents the area with the most open trades—shows a net volume of 8.21 million ETH at around $1,550, with sellers outnumbering buyers of 170,000 ETH transactions.

Daily ETH/USD price chart. Source: TradingView

In other words, the current ETH price recovery may not have the legs it did in March 2020, especially when combined with the overall decline in volume profile over the past two years.

Most Ether investors are still in profit

| More ▼ negative signals for Ether come from one of Ethereum’s widely watched on-chain metrics, which tracks the percentage of circulating ETH supply in profit.

Connected: Ethereum expects a 25% correction in March, but ETH price bulls have a silver lining

As of March 6, about 65% of ETH was bought at a lower price. In other words, the probability of investors securing profits remains high in the event of a significant price decline.

Offering Circulating Ether at a profit. Source: Glassnode

Therefore, the Ether price could see a real bottom if the profit supply falls below 30% (green area), which would reflect previous market cycles and the March 2020 bottom as shown in the chart above.

This article does not contain investment advice or recommendations. Every investment and trading move involves risk and readers should conduct their own research when making a decision.