Crypto Analyst Thinks Ethereum is Undervalued! Is He Correct?

Ethereum (ETH), the world’s second-largest cryptocurrency by market capitalization, is once again in the spotlight. 

A well-known crypto analyst, Ali Martinez, has ignited a debate after suggesting that Ethereum could currently be undervalued based on key on-chain metrics. 

But is there substance behind this claim? In this article, we’ll explore the analysis, dive into what the data really says, and assess whether this could be a pivotal moment for ETH investors.

The Analyst’s Claim: Ethereum Is Undervalued

Ali Martinez, a popular figure in the crypto world with over 135,000 followers on X (formerly Twitter), recently pointed out that Ethereum’s Entity-Adjusted Dormancy Flow has dropped below one million. 

This rare on-chain signal, he argues, may indicate that Ethereum is in the process of carving out a major cycle bottom, suggesting the asset might be undervalued.

“This historically indicates a macro bottom zone,” Martinez said. “It means ETH might be undervalued and long-term holders are less inclined to sell. 

Read also: Ethereum (ETH) Price Prediction 2025-2027: Can ETH’s Poor Performance Be Cured?

What Is Entity-Adjusted Dormancy Flow?

To understand Martinez's claim, we need to look closer at the Entity-Adjusted Dormancy Flow—a metric developed by the blockchain analytics firm Glassnode. This indicator is used to assess market bottoms and overall market conditions.

Essentially, it measures the ratio between a coin’s market capitalization and the annualized dormancy value, which reflects how long coins remain dormant before being moved or sold. 

A low value generally suggests a lack of recent movement from long-term holders, which can signal that the market is nearing capitulation—a point where weak hands have exited and more experienced investors (smart money) are accumulating.

In short, when this metric falls as low as it recently has, it often aligns with historical market bottoms for ETH.

Exchange Outflows Add Fuel to the Bullish Fire

Adding to the argument, Martinez also noted a massive 453,000 ETH withdrawn from crypto exchanges over the past five days.

This trend is particularly significant because large exchange outflows typically indicate accumulation by institutional or high-net-worth investors, who prefer to store assets in cold wallets rather than on trading platforms.

Such outflows reduce the circulating supply of Ethereum available on exchanges, which can create supply-side pressure if demand rises, pushing the price upward.

Ethereum’s Price Action and Current Sentiment

As of April 12, 2025, Ethereum is trading at $1,558, up more than 2% in the last 24 hours. Despite this recent bump, ETH remains well below its all-time high near $4,900 reached in late 2021. 

This significant price gap adds weight to the argument that the asset might be trading below its intrinsic value, especially if fundamentals remain strong.

Market sentiment remains mixed, however. While some traders fear broader macroeconomic challenges, others are optimistic about Ethereum's long-term potential, particularly given its leading role in the decentralized finance (DeFi) and non-fungible token (NFT) ecosystems.

Read also: Reviewing Ethereum Development in China: Key Influences on ETH Price Movements

A Closer Look: Is Ethereum Really Undervalued?

So, is Ethereum truly undervalued?

Here are a few factors to consider:

• On-chain metrics like Dormancy Flow point toward a potential market bottom. Historically, such signals have preceded major rallies.
  
   
• Exchange outflows suggest accumulation by sophisticated investors.
  
   
• Developer activity and network upgrades remain robust. Ethereum’s transition to proof-of-stake has drastically improved energy efficiency and continues to attract developers and projects.
  
   
• Yet, macroeconomic uncertainty and regulatory scrutiny still loom, which could pressure prices in the short term.

While the technical indicators support the undervaluation argument, the broader picture requires caution. Investor psychology, regulatory changes, and global financial trends all influence crypto markets—sometimes more than on-chain data.

Conclusion

The case for Ethereum being undervalued has gained momentum, especially with analysts like Ali Martinez highlighting historical on-chain trends that have preceded major upswings. 

The Entity-Adjusted Dormancy Flow and large-scale ETH withdrawals from exchanges are certainly bullish signals that suggest long-term confidence in the asset.

However, while these indicators point to a potential market bottom, they are not guarantees of immediate price recovery. For now, investors might view this as a compelling accumulation opportunity, especially for those with a long-term horizon.

FAQ

Why do some analysts think Ethereum (ETH) is undervalued right now?

Crypto analyst Ali Martinez pointed to a key on-chain metric called Entity-Adjusted Dormancy Flow dropping below one million. Historically, this level has signaled market bottoms, indicating that Ethereum may be undervalued and in a potential accumulation phase.

What is Entity-Adjusted Dormancy Flow?

This is a metric developed by blockchain analytics firm Glassnode. It compares Ethereum’s market cap with the "dormancy" of coins (how long they've remained unmoved).

• Low values suggest long-term holders aren’t selling,
  
   
• Indicates possible capitulation, and
  
   
• Suggests the market may be near a bottom.

What does it mean when ETH is withdrawn from exchanges?

According to Martinez, 453,000 ETH were withdrawn from exchanges over five days. This is often a bullish sign, suggesting that large holders or institutions are accumulating ETH and moving it to cold storage, reducing the liquid supply.