Ethereum’s Performance in Q2 Signals a Trying Period Ahead

Ether's value against the US dollar steadily fell in Q2, with the price of premier altcoin shrinking by almost 70% across the 3-month period. The ETH/USD pair tracked a nearly-consistent decline, save for minor relief breaks, from just over $3,500 to $1,060 on the last day of June.

ETH Q2 report card: The worst display in record

The quarterly performance is the worst on record for Ethereum since it was launched in 2015, Coinglass data shows. The monthly return for Ether in June was -44.79% which is the biggest monthly red candle in history and only the second time the token has printed monthly losses of over 40% since November 2018.

Also worth noting, Ethereum has posted negative returns for three consecutive months for the first time since April 2018. Back then, it bled for seven months successively.

Ethereum is suffering just as much as Bitcoin

In a report published on June 24, Glassnode analyzed the statistical scale of capital destruction on the Ethereum network in the ongoing bear market. Glassnode analysts recounted that much like Bitcoin – whose performance the report also featured – ETH has seen a surge in investor liquidation and massive unrealized losses.

The blockchain data and intelligence platform noted that the two market-leading assets are additionally trading below their previous cycle's all-time highs for the first time in history. Particularly for Ethereum, Glassnode explained that the token's massive fallback from its ATH disproves any argument that previous peaks could be used to determine its level of support in the ongoing bear market.

BTC dominance, a sign of ETH under-performance

Glassnode found that historically, Bitcoin has traded under the realized price for 13.9% of its life compared to a more significant proportion of 37.5% in the case of ETH. Realized price typically indicates the severity of capital outflow from the markets and the intensity of realized losses. This means ETH traders ‘usually' have to contend with more periods of seeing their tokens trade below their respective buy prices.

The observation aligns with a previously seen market trend in which Bitcoin outperforms Ethereum in the bear market. Realized cap, a metric aggregating the value of tokens and their price when last transacted, also shows that ETH has lagged BTC in this bear market.

Unrealized losses & MVRV

With investors struggling to deleverage their holdings away from the decentralized finance ecosystem, ETH prices have pushed them into unrealized losses. MVRV also shows even more intense pressure on Ether staked on the Beacon Chain – which was last spotted 55% off the mark. On-chain data also indicates that stakers are sitting deep into unrealized losses than the average investor.

Meanwhile, profitability in transactions on Ethereum has remained weak. Overall, investors are recording double-digit losses per transaction – such a lack of profitability was last seen in the 2018 bear market.

Pangea Fund CEO: Brace for testing times as Ethereum (ETH) is yet to capitulate

Pangea Fund's Daniel Cheung recently added voice to projections that Ether is yet to find a bottom in a series of tweets. The fund manager warned that ETH investors should watch out for a looming flush in the market. Cheung theorized that the altcoin could potentially see even worse performance over the next two months. He added that real capitulation is yet to hit the broader market, which he observed to be in a phase where prices are heavily influenced by macro factors such as Federal Reserve policy and inflation concerns.

“ETH is likely going to just be a levered and liquid bet on Nasdaq for at least the next 2 months […] I believe there is a very favorable 2-month short opportunity to be made at ~$1200 $ETH. Remember to go in with protection – I propose setting $1300 as a point to cover the short,” he wrote.

Meanwhile, Ether balance on exchanges has revisited April levels with data and analytic platform Glassnode, noting that the figure reached a 3-month high of 21,581,770 ETH on June 29.

The picture is different for Bitcoin, whose balance on exchanges has been shrinking and recently hit a 3-year low of 2,384,477 BTC as the asset's price slumped to an 18-month low.

This observation has in the past suggested that many holders are removing their assets from exchanges which often implies a higher buying demand in the market. However, at present, retail and institutional investors reasonably have low expectations with the macroeconomics still weak and no significant catalysts in sight. Several analysts concur that Ethereum and Bitcoin will test even lower levels in the near term, with a return to a three-digit price figure in the offing for the former.

To learn more about Ethereum visit our Investing in Ethereum guide.