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On-chain data shows that the buy/sell ratio of Ethereum buyers has recently formed a crossover that has historically signaled highs in the asset’s price.
Ethereum Taker Buy/Sell Ratio 280-day and 476-day MA recently crossed
As noted by an analyst in a CryptoQuant post, this crossover was last formed in May 2021 when ETH saw the top of a bullish rally form. The relevant indicator here is the Ethereum Buy/Sell Ratio, which measures the ratio between buying and selling volume.
When the value of this metric is below 1, it means that the volume of selling short positions or takers is currently higher than the volume of long positions or buying volume of takers in the market. This trend is a sign that there are now more sellers in the market who are willing to sell at a lower price, which means that selling pressure is prevailing.
On the other hand, when the indicator is higher than 1, it indicates that the bullish sentiment is shared by the majority, since the volume of long positions exceeds the volume of selling.
In the context of the current discussion, the 280-day and 476-day moving averages (MA) of Ethereum taker buy/sell ratios are of interest.
Here is a chart showing the dynamics of these MA indicators over the past few years:
The values of the two indicators recently converged | Source: CryptoQuant
As shown in the chart above, the 280-day moving average for Ethereum buy/sell ratio fell below the 476-day moving average last month. Interestingly, just at the moment when this intersection occurred, the price of the asset formed a local top near the level of $2,100.
When the 280-day MA falls below the 476-day MA of this metric, it means the market is turning more bearish as it suggests an increase in buying volume dominance.
For this reason, such a crossover has been bearish for the value of the cryptocurrency in the past. It can be seen from the chart that this type of crossover last formed in May 2021 when ETH was in the midst of a bull market in the first half of 2021. Simultaneously with the intersection, the price of the cryptocurrency registered its historical level. high price.
Based on this, it is possible that the latest Ethereum buyer-to-buy ratio MA crossover could also turn out to be bearish for the price.
So far, ETH has only declined as the top formed along with this indicator, so it looks like the crossover effect may already be in play. However, the two moving averages are still fairly close in value, so it’s possible that a reverse crossover could form in the near future.
In 2020, both crossover types formed multiple times in quick succession until the bullish crossover type eventually won out, leading to the 2021 bull run that could be here.
Now it remains to be seen if the two moving averages will continue to diverge in the coming weeks, or if they will converge again and form a reverse type of crossover.
At the time of writing, Ethereum is trading around $1,800, down 2% over the past week.
ETH has been consolidating lately | Source: ETHUSD on TradingView