ETH Price Prediction Using This Guide: What is “Average Buy Profit,” and How Can Ethereum Traders Use it Effectively?

If you’re new to crypto investing or trading, you’ll encounter many unfamiliar terms and metrics. One particularly useful metric is the Average Buy Profit (ABP), offered by blockchain analytics platforms like Whale Alert. Let’s break down ABP step-by-step and see how Ethereum (ETH) traders can use it effectively.

(Note: ForexLive.com will soon evolve into InvestingLive.com this summer, expanding our insights across multiple asset classes—stay tuned!)

Step 1: What Exactly is Average Buy Profit (ABP)?

Imagine this straightforward scenario:

You decide to buy Ethereum (ETH) and purchase your first ETH at $2,000. Later, ETH is rising, and you buy another ETH at $3,000. Now you hold two ETH tokens, and you’ve spent a total of $5,000. Your average buy price per ETH, therefore, is $2,500.

Now, let’s say Ethereum’s price later rises to $3,500. At this price, your Average Buy Profit per ETH token is $1,000. This is because your average buy price was $2,500, and the current market price is now $3,500.

In simple terms, ABP measures how profitable (or unprofitable) your investment is per token, based on your average purchasing price.

Step 2: Why is ABP Important for Traders?

ABP provides a clear snapshot of market sentiment—whether investors are currently profitable (bullish) or at a loss (bearish):

• Positive ABP (profit) indicates that many investors bought their crypto at lower prices and are currently profitable. This usually means the market sentiment is positive or bullish.

• Negative ABP (loss) suggests investors bought at higher prices, and if they sell now, they’d lose money. This usually implies caution or a bearish sentiment.

Understanding ABP helps traders anticipate shifts in market sentiment and potential price movements.

Step 3: Understanding the ABP Chart (Green Bars vs. Red Bars)

ABP is usually visualized through easy-to-read charts:

• Green bars: Show investors selling at a profit, typically indicating strong market sentiment.

• Red bars: Show investors selling at a loss, signaling short-term market uncertainty or possible bearishness.

Ethereum (ETH) ABP in the Last 7 Days

Looking at Ethereum’s recent ABP data, here’s what we observed:

• Early in the week (Days 1-2): Many green bars appeared, suggesting frequent profit-taking. Investors who bought ETH earlier at lower prices were selling to secure their gains. This is typically a sign of positive market sentiment and healthy upward price momentum.

• Midweek (Days 3-5): Some noticeable red bars appeared, meaning investors were selling ETH at a loss. This likely indicated temporary price dips or moments of market uncertainty. Such periods may provide attractive buying opportunities for traders who remain bullish on Ethereum’s longer-term prospects.

• Most recent (Days 6-7): We see a return of frequent and substantial green bars, indicating renewed strength and optimism. Investors once again started taking profits, suggesting that the Ethereum price has stabilized or resumed rising.

The Realized Profit per Token of ETH in the Last 7 days

ETH Proice Prediction: Additional Note for Sharp-eyed Traders

If you’ve carefully studied the ABP chart image included in this article, you may have noticed the beginning of a relatively significant red bar at the most recent timeframe. This suggests some investors are now beginning to sell Ethereum at a loss, which could indicate the start of some short-term profit-taking or a temporary pullback.

To cross-check this, we analyzed Ethereum through volume profile analysis using Bitcoin Futures as a correlated indicator. Currently, Bitcoin Futures trade at around $2,657, with notable resistance zones appearing slightly higher, specifically between $2,665 to $2,675. This zone includes key technical resistance points such as yesterday’s Point of Control (POC), yesterday’s Value Area High (VAH), and other important price levels.

This means Ethereum, correlated with Bitcoin’s movement, might encounter temporary selling pressure or profit-taking at apx $2675. Although Ethereum’s longer-term trend remains bullish, short-term traders and investors might expect a temporary price dip or profit-taking in this area. It’s wise to stay alert and carefully manage your positions accordingly.

Frequently Asked Question (FAQ)

Q: “If investors are selling Ethereum to take profits, isn’t that actually bearish? Why wouldn’t they just ‘HODL’?”

A: This is a common and important question, especially for beginners. Let’s clarify:

• Normal Market Behavior: Profit-taking is very common and healthy. Investors routinely lock in gains to manage risk, rebalance their portfolios, or simply secure their profits.

• Profit-taking vs. Panic-selling: There’s a big difference between careful, strategic profit-taking (typically positive or neutral) and rapid panic-selling (usually negative). Profit-taking tends to be measured and gradual after prices have risen significantly, whereas panic-selling is sudden and driven by fear.

• Partial Selling and Long-term Holding: Investors often sell part of their holdings to secure profits while holding most of their assets long-term (“HODLing”). Selling part of an investment doesn’t necessarily reflect a lack of long-term confidence.

• Sign of Market Strength: Regular profit-taking signals a healthy market environment where investors have made gains worth locking in, often a positive indicator of sustained market strength.

In short, moderate and routine profit-taking isn’t bearish by default; rather, it’s a natural and healthy aspect of market cycles.

ETH Price Prediction Disclaimer

This article provides educational insights and explains how to interpret Average Buy Profit (ABP) data for Ethereum and other cryptocurrencies. It does not constitute financial advice. Crypto trading involves risks, including the potential loss of your invested capital. Always perform your own research or consult with a financial advisor before making investment decisions.

Trade at your own risk.

(Stay tuned: ForexLive.com is evolving into investingLive.com this summer, expanding our resources and insights across broader investment categories.) This article was written by Itai Levitan at www.forexlive.com.