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While some traders experience losses following crypto market dips, market participants that have not yet entered any positions are now able to get in while assets remain in the opportunity zone, according to market data provided by Santiment.
What is a "Low Risk Buy Area?"
First and foremost, every deal on the cryptocurrency market is a risk due to the industry being too volatile and exposed to regulation and manipulation. But in some cases, the market provides more pleasant conditions for entry, compared to periods when assets are topping out.
The risk of the buy or sell area is determined by the MVRV ratio, which is calculated by dividing the total market value of an asset by its realized value. The indicator is showing whether an asset is being "overbought" or trading at a discount.
What does the indicator show for Ethereum
According to the data provided by the indicator, for the first time in almost two months, Ethereum has entered the "discount zone," which means it might be less risky to enter the market now.
But the provided information can be introduced in different ways. The MVRV ratio, just like any other indicator, can be used with various settings and, in this case, the indicator is set to show the condition of the market based on short-term data.
�� #Ethereum had a roughly -15% price drop since topping out at its $4,878 #AllTimeHigh last week. Our latest insight reveals where $ETH's market health stands, what its rising address activity and lowering fees mean, and more. � https://t.co/25m37cYjA4 pic.twitter.com/I725S1KRYZ— Santiment (@santimentfeed) November 18, 2021
The long-term version of the same indicator shows that Ethereum market value is still overextended, and to enter the "Low Risk" zone, it needs to be corrected by another 40%.
At press time, Ethereum is trading at $4,236 while remaining in the 10% correction that began on Nov. 12. In the event of Ethereum hitting another 40% correction, the second-largest cryptocurrency would trade at around $2,500.
Arman Shirinyan is a trader, crypto enthusiast and SMM expert with more than four years of experience.
Arman strongly believes that cryptocurrencies and the blockchain will be of constant use in the future. Currently, he focuses on news, articles with deep analysis of crypto projects and technical analysis of cryptocurrency trading pairs.