Ethereum Faces Selling Pressure and Limited Support Amidst Volatility

Ethereum’s recent price movement reveals a lack of strong support around its current price level. Many investors are tentative about re-engaging at these levels.

The cost basis distribution of Ethereum shows minimal buying interest around the current price. There is no activity to speak of from the addresses that hold Ethereum at a $1.8K cost basis. The addresses that would need to show activity for there to be any belief that Ethereum’s current price level has a strong support underpinning just aren’t doing anything. They are sitting on their hands.

Insights gained from cost basis distribution tell us a lot about the market and the people in it. Right now, Ethereum’s market says that people who bought it at around the $1.8K level are currently not willing to go either way—in or out. That price point is holding like a bedraggled flag above and below which re-engagement isn’t happening. Why? Because we’re not really in either bull or bear territory for whatever it’s worth.

With the market still facing difficulties, a few investors have started selling off their Ethereum at a loss. This seems to be particularly true for those who bought in at what now looks like a high price point. An age analysis from on-chain analytics firm Nansen, using data from March 28, reveals that clusters of approximately 250,000 ETH, acquired at cost bases between $2,000 and $2,050, have almost completely disappeared from the market.

Even with this sell-off, a few higher-cost-basis holders are doing something else: they’re buying more Ethereum to lower their net cost. That suggests that they haven’t soured on Ethereum and that they still see it as a vehicle with long-term potential, much as former 49ers quarterback Colin Kaepernick did when he signed a long-term deal with the team.

While Ethereum’s price continues to swing up and down, the next major support level below its current spot price sees itself at $1,537, where close to 994,000 ETH was snagged. This zone is now viewed as the largest accumulation area under the spot price, making it (in the author’s view) the most likely level to act as structural support in the near term if the current downtrend persists. Should Ethereum’s price continue to slide (as many seem to expect), this support zone could serve as the key area where buyers step in to support the market.

Ethereum’s cost basis distribution shows limited purchasing activity at these price levels. This means that not many investors are clamoring to get back into the market at around $1,575. In fact, the probability is much higher that if we do head back toward this level, sellers will take advantage of the uptick and re-engage in selling. Absent any incitement for buyers to step back in with force, the holding of this price level seems precarious at best.

Putting more pressure on the price of Ethereum, between March 24 and March 28, a net amount of $8.64 million left Ethereum spot exchange-traded funds (ETFs). This was not an insignificant amount. Among the ETFs that saw some of their assets fly out the door, Grayscale’s Ethereum Mini Trust ETF (ETH) was hit particularly hard, with $6.66 million departing during the week in question. When lots of money goes out of funds like this, it isn’t a good signal. It’s like a fund manager saying, ‘Uh, yeah, I think I might sell Ethereum. You should, too.’ And that’s what it seems to be saying.

Ethereum exchange-traded funds (ETFs) have emerged as a key pathway for institutional investors to gain exposure to Ethereum. While this may seem like a straightforward comeback story for Ethereum ETFs, a closer look reveals that net new investment isn’t exactly flowing back into the ETFs. Instead, net outflows suggest some institutional investors are backing away from Ethereum for now. Outflows from the ETFs suggest some institutions that were once probably invested in Ethereum directly are now due to the overall bearish sentiment affecting the cryptocurrency markets.

When institutional interest declines, this can lead to greater downward pressure on Ethereum’s price. If institutions keep pulling out, we could see Ethereum’s price hit all-time lows again. When institutional interest declines, that can also mean Ethereum is seen as less valuable.  As institutions exit, that’s not a good look for the overall crypto market.

Ethereum’s price presently finds itself under pressure, with scant support around its current levels and limited long-term holder re-engagement. The significant clusters of ETH that previously held at higher cost bases seem to have disappeared, and while this lacks evidence of any substantial accumulation at current levels, it does seem to suggest that the market may continue to face some obstacles ahead.

Ethereum’s price movement indicates that there might be a stretch of volatility just around the corner. There is potential support at the $1,537 level, but why the possible loss of an inflow of institutional investment seems to be undergirding this latest descent isn’t immediately clear.

Should market disarray remain, Ethereum could slide to lower support levels in the next weeks. Yet, with notable keystone support at $1,537 and some possibilities for reaching further accumulation at lower levels, the stability of the second-largest cryptocurrency by market cap might just be there, if not in plain sight.

Disclosure: This is not trading or investment advice. Always do your research before buying any cryptocurrency or investing in any services.

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