ETH circulation compared to market cap shows most bullish divergence since May 2021

ETH allocation vs. market cap shows the strongest bullish divergence since May 2021

Ethereum (ETH)'s merge upgrade is officially less than two days away, as the second largest asset by market cap is expected to begin its Proof-of-Stake (PoS) transition on September 15.

Given the interest in the DeFi asset, on-chain metrics are showing positive signs. The ratio of each ETH moved to the network's current market cap is at its best in 16 months, according to NVT circulation model data from behavioral analysis platform Santiment as of Sept. 13.

Circulation of Ethereum tokens. Source: Santiment

Compared to its market cap, Ethereum token circulation is showing the most optimistic divergence since May 2021, a As traders prepare for the merger, ETH token circulation has in turn rallied into a bullish signal.

Still, there could be an increase in circulation due to, among other things, DeFi operations and concerns about the potential loss of collateral after the merger.

Merge upgrade has its naysayers

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It's worth noting that Marcus Sotiriou, an analyst at GlobalBlock, a digital asset brokerage firm, said in a note Finbold received on March 12,

According to Sotiriou, some of the challenges that are likely to arise after the transition will be the inability of users to process the new chain since the software will still be new.

"Also, some of the APIs could break in ways that many people cannot predict. Additionally, there could be another delay that would frustrate investors who have been waiting for this transition for years," he said.

Meanwhile, a popular crypto trader also warned that Ethereum could experience a pump-and-dump situation, especially in the distribution of tokens from the legacy Proof-of-Work (PoW) protocol. On the subject, Kevin Murcko, CEO and Founder of Coinmetro, told Finbold:

"Traders seem to be using one of the oldest tricks in the world: 'buy the rumour, sell the fact'. I wouldn't be surprised if there was a price drop in the second half of September. But that won't stop retail investors, fueled by FOMO, from lining their pockets in the meantime. However, in the longer term, the merger will undoubtedly have a positive impact on Ethereum.”

He added:

“September marks another milestone in cryptocurrency history, and that means huge scope for investment returns.”

Finally, Ethereum was trading at $1,720, down 1.37% over the past 24 hours but up 3.94% from the previous week at the time of publication, with a total market value of $210 billion, according to CoinMarketCap.