Despite the aggregate crypto market’s relatively sluggish start to 2022, Ethereum’s on-chain metrics look incredibly good. The utility and adoption of Ethereum have picked up the pace over the past few months, with rising capital inflow and on-chain activity. 

With undervalued fundamentals and a current price far from all-time highs, you may be wondering if it is the right time to buy the dip before Ethereum enters into the next bullish rally.  

Sometime later this year, the most important commercial highway in cryptocurrency is about to be completely repaved and refined. Namely, Ethereum is set to make the biggest change in its near-decade history — moving from a proof-of-work (PoW) consensus algorithm to a proof-of-stake (PoS) one. At its core, the merge to PoS will reduce network energy usage by at least 99.95%.

Want a full run down on the ETH Merge happening later this year? Check out our in-depth article on the Ethereum Merge.

On-chain analysis is a vital tool that you can use to separate the speculative value of a cryptocurrency from its utility value. Currently, Ethereum’s on-chain data suggests a bullish narrative, with many metrics flashing potential buy signals.

Ethereum Exchange Reserve – all Exchanges:

In the graph above, Ethereum’s exchange reserve is in a strong downtrend, with a notable decrease in the last few weeks. This sign indicates lower selling pressure on exchanges. 

The Taker buy sell-Ratio as a MACD Wave:

Source – DeFire Academy

The graph above represents the taker buy sell ratio (an indicator that measures the volume of buy orders and sell orders) as a MACD wave.  Ethereum is in a buying phase, last seen in early 2021 before the 2021 bull market. Data indicates that buy orders are currently prevailing, suggesting that smart money is buying the current dip in anticipation of higher prices. This trend may be a reason to dollar cost average the dips; however, further downside is still plausible.

Increased ETH 2.0 Staking Inflow:

Source – DeFire Academy

As observed by the upward-trending ETH staking rate in the figure above, the value locked in Ethereum is rapidly rising. Additionally, more outflows in ETH supply are being locked up in the ETH 2.0 staking contract. This ETH can’t be sold in the near future, which means less supply can be bought. 

ETH: Issuance 

Overall, a reduction in coin supply in the short term paints an overall bullish picture for the Ethereum ecosystem.

Conclusion

As the Merge draws closer, the hype surrounding the Ethereum network continues to magnify. While the upgrade may still bring about powerful and positive changes to the Ethereum network, it is important to acknowledge that cryptocurrencies are inherently risky. Negative macroeconomic events that impact the broader cryptocurrency market may offset Ethereum’s bullish upgrade.

Deciding between investing in Bitcoin and Ethereum? Checkout our comprehensive comparison of the 2 largest cryptocurrencies!