A significant shift may be on the horizon for Ethereum ($ETH) as its Entity-Adjusted Dormancy Flow falls below the 1 million mark, according to recent data provided by @ali_charts on X. This indicator serves as a standard measure for market cycles, suggesting that $ETH may currently be at its lowest price point before a potential reversal of the downward trend.
The Entity-Adjusted Dormancy Flow is calculated by dividing the current market capitalization by the annualized dormancy value (expressed in USD). A reading under 1 million is considered a positive sign as it indicates that long-term holders have chosen to retain their assets, showing confidence in the potential for future returns.
This latest update from X points out three key market factors: a decrease in sentiment, the likelihood of capitulatory selling behavior, and the potential for smart money investments.
The sentiment in the market tends to hit rock bottom when prices are at their lowest, marked by peak pessimism just before prices start to rebound. It is likely that weaker speculative traders have incurred losses by selling their positions, reducing the selling pressure in the market and setting the stage for a price surge.
Historically, large financial institutions, or “smart money”, have been known to accumulate $ETH at certain price levels, often leading to substantial market rallies. Data from Glassnode and other platforms show that Bitcoin’s dormancy trends have followed similar patterns, indicating potential buying opportunities.
The data shared by @ali_charts spans a period from 2016 to 2025 and reveals that market bottoms have consistently corresponded with the Entity-Adjusted Dormancy Flow falling below the 1 million mark. While this metric could be a valuable tool for investors, it should not be used in isolation.
Investors are advised to keep a close eye on network activity and transaction volume data on The Block platform, as well as broader market conditions, to gain a comprehensive understanding of the market dynamics.
As Ethereum continues its volatile journey, changes are to be expected. Given the complexity of these on-chain metrics, it’s vital for investors to conduct thorough analyses and not rely solely on this single data point. The market will continue to be monitored to see if Ethereum will rebound from its possible price undervaluation. This analysis underscores the importance of maintaining a well-rounded, informed perspective on the ever-evolving cryptocurrency market.
