The major Ethereum support area is $1,800 but weaker than Bitcoin‘s — Analyst

January 31, 2024 CryptoExpert Ethereum
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The major Ethereum support area is $1,800 but weaker than
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The price of Ether (ETH) is hovering near its all-time high once again, while Bitcoin (BTC) is still far from surpassing its record high at $60,805.

But despite ETH demonstrating strong technical momentum and entering price discovery, on-chain analysis finds that its support is “narrower” than Bitcoin’s.

Simply put, ETH faces a bigger risk of seeing a deeper pullback than Bitcoin in the foreseeable future if the market turns around.

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USD cost of Ether held since November 2020. Source: Chainalysis, Philip Gradwell

Why does Ether have a weaker support area than Bitcoin

Philip Gradwell, chief economist at Chainalysis, said that ETH’s price has narrower support near its record high compared to Bitcoin.

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If the market corrects, the next major ETH support level, is around $1,800, Gradwell noted.

Based on the accumulation trend of ETH, Gradwell explained that the strongest level of demand is at $1,800. He said:

“The Ethereum price reached a new all-time high this week, but cost-curve analysis suggests the peak Ethereum price has a narrower base of support than the peak Bitcoin price, with the next strongest level of observed demand for Ethereum at $1,800.”

Gradwell used a data point called “the USD cost of Ethereum held” — which is similar to whale clusters for Bitcoin — to estimate at which price level investors accumulated ETH.

If the $1,800 support level gets broken and the market sees a sizable correction, the economist said that $1,500 is a “particularly strong” next level of support for ETH.

A drop to $1,500 would mean ETH would see a 30% drop from the current price of around $2,100. 

Historically, 30% pullbacks occur frequently during bull cycles, but in the recent cryptocurrency market uptrend, there has not been many 20%-to-30% pullbacks compared to the run-up in 2017.

Nonetheless, Gradwell emphasized that $1,500 is the macro support level for ETH in the short to medium term. He added:

“The ETH market has changed radically in recent months, with a significant increase in the cost of acquisition for over 50 million ETH, out of a total supply of 115M. Support at $1,500 is particularly strong, with 33.3M ETH acquired above this level at a total cost of $58 billion.”

One key reason ETH might have a narrower support base than Bitcoin could be the small number of long-time hodlers.

After the peak in 2017, Gradwell found that a small cohort of investors held ETH despite seeing major losses. 

The economist said that such a trend supports the concern that ETH has a weaker support base, at least relative to Bitcoin.

Traders expect ETH to continue rallying above ATH

In the short term, traders still expect ETH to see a broader uptrend despite the concerns for a narrow support base.

A pseudonymous trader known as Blunts said that based on the bottoming out formation on the four-hour chart, ETH would likely see another record high before BTC.

The trader said:

“Looks like that was the $eth low. At this rate eth will be at ath before btc.”

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ETH/USD 4-hour price chart with key levels. Source: TradingView.com, Blunts

Atop the favorable technical market structure, according to Glassnode, the hash rate of the Ethereum blockchain network has hit a new all-time high.

Hence, both fundamentals and price technicals suggest that the momentum of ETH’s price has a good chance of sustainability in the near term.



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