Ethereum price is having its worst February performance in history. Despite this dip, the Ethereum (ETH) Cost Basis Distribution shows that instead of completely exiting their positions, investors are accumulating ETH at lower prices. As accumulation builds, can ETH price defend support at $2,300 and possibly rally to $3,000?
Ethereum is Down 11%, Price Trades at $2,394
Ethereum price today trades at 2,394 after an 11% drop in 24 hours. This drop mirrored a massive pullback across the broader crypto market that saw the total market cap fall by a staggering 8% to below $3 trillion as total liquidations topped $1.5 billion according to Coinglass. Ethereum saw the second-highest level of liquidations of $300M, out of which $276M were long positions.
The negative sentiment from the broader market adds to the headwinds that have stirred Ethereum’s price volatility this week after the Bybit hack. The hackers are laundering the stolen ETH on exchanges, and despite recovery attempts, this activity may weigh on ETH and cause more volatile price swings.
Ethereum Price Analysis as Cost Basis Drops
The price of Ethereum has been under bearish stress, leading to the delay of an altcoin season. However, ETH is defying the usual panic selling trend as Glassnode’s Cost Basis Distribution (CBD) metric shows its cost basis is dropping.
The CBD metric is used to check the price at which new investors are buying ETH. As the cost basis drops, it indicates that investors are willing to buy Ethereum at cheap prices.
Ethereum Cost Basis Distribution
One of the main accumulation zones where traders bought 768K ETH as the price dropped is at $2,632. Earlier this month, as ETH fell below $3,300, traders also bought 1.22M ETH at $3,149. If the downtrend extends, it could mark the beginning of another accumulation phase as traders look to buy the ETH dip.
As the cost basis drops, there is a high likelihood that the price of Ethereum will defend key support levels. This is contingent on whether traders stick to past accumulation trends.
Key Support Levels to Watch
Ethereum price is about to record its worst performance in February and defy historical trends that dictate that the month has always boded well for ETH. As the price retraces, one of the most critical support levels to watch is $2,300.
As trader Ali Charts pointed out, the price of Ethereum has been trading above this support since February last year. If it breaches this level, it could accelerate a downtrend towards the psychological price of $2,000.
ETH/USD: 3-day Chart
As aforementioned, the cost basis drop supports the thesis of the price holding levels above $2,300. Additionally, if long liquidations cool off after nearly $300M in forced selling within 24 hours per Coinglass, it could give room for a recovery.
Another crucial price level to watch in Ethereum price prediction is the lower trendline of a falling wedge pattern on its daily chart. The falling wedge pattern often signals a reversal from a bearish trend. If ETH bounces from the lower trendline and flips resistance at the upper trendline with strong buy volumes, it could spark a rally past $3,200. Conversely, if support at this lower trendline fails to hold, it could cause further downside.
ETH/USDT: 1-day Chart
What Short Positions Suggest About ETH
If Ethereum price can defend the $2,300 support and reverse to breach resistance at the upper trendline of its falling wedge it could rally towards $3,000 in the near term. However, such a rally could wipe out nearly $2 billion in short positions in a massive short squeeze.
Ethereum Liquidation Map
Short sellers are traders who bet that the price of an asset, in this case, Ethereum, will drop. If ETH were to make a sudden recovery and approach this hot liquidation zone, the cascade of short liquidations could accelerate the uptrend due to additional buying pressure as short sellers close their positions.
However, despite $3,000 being a major liquidation zone, Ethereum price would have to clear resistance at around $2,800 to confirm an uptrend to this level.
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