• Ethereum saw a huge drop in Open Interest in April following the rejection at $3.7k
• The on-chain metrics were still healthy, hinting at the possibility of an uptrend

Ethereum [ETH] was trading at $3.2k at press time. The $3k psychological level was breached multiple times since the 13th of April on the lower timeframes, and sentiment behind the altcoin king has weakened considerably.

This was evident by the sheer drop in the Open Interest behind ETH. Combined with the price trajectory of the past couple of weeks, it appeared that a downtrend was possible.

Yet, with $3k defended on the higher timeframes, there was also the possibility of a resurgence for the bulls. AMBCrypto investigated on-chain metrics to understand which path is more likely.

Similarities to Feb 2021

During the previous bull run, in mid-February 2021, the price of Ethereum corrected from $1.9k (an ATH at that time) to $1.4k. It was followed by a V-reversal, but it showed that there are many times when the futures market gets overheated.

Impatient bulls want to make a quick buck going long on leverage. This does work, but after a point, the lack of spot demand and the overwhelming longs in the futures market get reset.

The drop in OI from $10 billion to $7.17 billion in April was likely one more such reset. It is unclear whether a similar V-reversal would commence, given the selling pressure behind Bitcoin also in recent weeks.

User adoption has fallen alongside prices, sentiment

The weighted social sentiment had been strongly positive in February and for a couple of days in mid-March. Since then, it has been negative for the most part as prices entered a correction. The sentiment before the price peak could also revolve around the high gas fees on the network.

The network growth metric also slowed down in the past three months. An uptick would be a sign of growing demand, but it will more likely follow an uptrend than precede it.

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The 90-day mean coin age has trended steadily higher since 27th March. This showed a network-wide accumulation of ETH. Meanwhile, the 30-day MVRV ratio has been negative for nearly a month now, showing holders at a loss.

It presented a good buying opportunity, but some uncertainty remained. If ETH can climb back above the $3.3k resistance, swing traders and investors will be more confident of continued gains.