Ethereum Is Currently Retesting A Major On-Chain Support Zone

In a new post on X, analyst Ali Martinez has discussed about how Ethereum is looking like in terms of investor cost basis distribution right now

A recent analysis by an analyst on X has highlighted the crucial importance of a specific on-chain demand zone for Ethereum, emphasizing that losing this zone could potentially lead to a drastic price crash to as low as $1,800.

According to the analysis, which utilizes data from IntoTheBlock, a platform known for its market intelligence, vast amounts of ETH were acquired by investors within the price range of $2,292 to $2,359. This information is depicted in the chart, where the size of each dot corresponds to the quantity of ETH last purchased by investors within a particular price range.

In this case, the substantial dot size within the mentioned price range indicates significant buying activity. More precisely, nearly 52.3 million ETH was acquired by 1.9 million addresses within this range.

As Ethereum is currently retesting this price range, investors who purchased within it would be breaking even on their investments at this point. Cost basis, typically defined as the average price at which an investor acquired a particular asset, serves as a crucial level for any investor.

Hence, they tend to be more likely to engage in some form of action during a retest of their cost basis. However, in cases where price ranges contain the acquisition levels of only a small number of holders, any market reaction resulting from a retest may not be particularly impactful for the broader market.

On the other hand, when large demand zones, such as the one identified for Ethereum, are retested, it can often lead to noticeable shifts in the asset's price.

In terms of how a retest of a large demand zone influences a cryptocurrency's price, the key factor lies in investor psychology. Retests that occur from above, indicating investors who were in profit just before the retest, usually generate a buying reaction in the market.

This phenomenon occurs because these holders may anticipate the asset's price to rise further in the future, making them more inclined to purchase more at their cost basis, which appears to be a profitable opportunity.

As Ethereum is currently retesting the $2,292 to $2,359 range from above, it's possible that this could provide support and contribute to a buying reaction. However, if a breakout below this zone occurs, the cryptocurrency's price may face further pressure.

The chart also reveals that the price ranges below this demand zone contain the cost basis of a small number of investors, indicating that they may not be able to prevent a further decline in the asset's price.

“If this demand zone breaks, we could see a sell-off driving ETH toward $1,800,” the analyst noted. A sell-off to this level from the current price would constitute a decrease of over 21% in the coin's value.

It now remains to be seen how the Ethereum price will unfold in the coming days and whether the on-chain support zone will hold.