A Glassnode analyst has pointed out how Ethereum is retesting a dense supply cluster that could set the tone for where the cryptocurrency heads next.
Ethereum Is Trading At A Dense Level On The CBD
In a new post on X, Glassnode analyst Chris Beamish has talked about how Ethereum is looking from the perspective of the Cost Basis Distribution (CBD). The CBD is an on-chain indicator that tells us about the total amount of ETH that investors last purchased at the various levels that the cryptocurrency has visited in its history.
Below is the chart shared by Beamish that shows the CBD heatmap for Ethereum.
As is visible in the graph, Ethereum’s bottom in November gave rise to a dense supply cluster on the CBD around the $2,750 level. Interestingly, the zone has since acted as a support barrier for the asset multiple times.
The explanation behind this trend could lie in investor psychology. Generally, investors are sensitive to a retest of their cost basis since it can lead to a flip in their profit-loss balance. As such, they can be likely to show some kind of move when one takes place.
When the retest is occurring from above, the holders might react by accumulating more in order to defend their break-even level. This is the pattern that has potentially been witnessed since the November bottom. From the chart, it’s apparent that Ethereum retested the $2,750 supply zone twice in December and both times, the asset was able to rebound.
Recently, a third retest has taken place and so far, the support has held, but it only remains to be seen how long the coin will maintain above it. “Holding here suggests absorption and base building, but a breakdown would move price into thinner support where underwater supply may derisk,” explained the analyst.
Usually, regions where a large amount of supply shares a cost basis tend to act as notable sources of support/resistance. The $2,750 cluster might fall in this category, but that doesn’t make it unbreachable. “Next move hinges on this level,” noted Beamish.
In some other news, Ethereum has witnessed a decline in transaction fees recently, as highlighted by Glassnode in an X post.
Following this drawdown, the transaction fees on the Ethereum blockchain has fallen to its lowest level since May 2017, a potential indication that network activity has gone down.
ETH Price
At the time of writing, Ethereum is trading around $2,950, down 1.5% over the last week.
Featured image from Dall-E, chart from TradingView.com
