Ethereum is nearing an undervalued zone versus bitcoin, but there is still no definitive signal that the market has bottomed, an analysis showed.

Cointelegraph reported on July 23 that on-chain analytics firm CryptoQuant assessed that Ethereum's on-chain indicators point to easing selling pressure and recovering demand, but the cycle low may still be forming.

Ethereum is currently trading about 17 percent below its realised price of around $2,300. The realised price refers to the on-chain average purchase price of all ETH in circulation. CryptoQuant noted that in the past, periods when ETH traded below its realised price often overlapped with market undervaluation and extended bottoming phases.

Relative value versus bitcoin also showed signs of improvement. Ethereum's MVRV, the ratio of market value to realised value, has retreated from an extreme overvaluation zone, and exchange inflows have declined. Exchange-traded fund holdings, which had been sluggish for months, have started to recover, and ETH/BTC spot trading volume has fallen to a range associated with past bottoming areas.

Even so, only 2 of 5 key bottom indicators presented by CryptoQuant have reached prior reversal levels. The other indicators are also improving, but they still fall short of the extremes seen at previous cycle lows.

The market environment also moved in Ethereum's favour. This week, Ethereum briefly rose above $1,950 and bitcoin broke above $67,000. Expectations around a U.S. Clarity bill boosted investor sentiment. Some market analysts are also discussing the possibility that funds could leave highly valued artificial intelligence (AI) stocks and move into cryptocurrencies.

On-chain flows show a signal of shrinking selling supply. In the week starting June 29, withdrawal activity at Binance, the world's largest cryptocurrency exchange by trading volume, hit its highest level in about three years. Markets often interpret outflows from exchanges as a sign that investors are shifting assets to self-custody or staking rather than leaving them on exchanges as potential sell supply. But this trend alone cannot confirm actual accumulation.

A rising share of staking also shows a shift on the supply side. According to StakingRewards data, 34 percent of Ethereum's circulating supply is currently staked. If participation in staking increases, the amount of ETH immediately available for trading could decline, which could reduce short-term selling pressure if demand holds.

The trend of growing institutional holdings is also continuing. Tom Lee's BitMine Immersion Technologies has added 325,000 ETH over the past month. The company has continued buying despite being in a state of large unrealised losses, and it has set a target of holding 5 percent of total Ethereum supply.

Ultimately, markets are distinguishing between signals of undervaluation in Ethereum and confirmation of an actual bottom. Indicators such as trading below the realised price, reduced exchange inflows, recovering ETF holdings and increased staking point to improvement. But as CryptoQuant noted, many key bottom indicators have yet to reach past reversal levels, leaving the focus on whether on-chain metrics and fund flows will provide further confirmation.