While Ethereum (ETH) price is once again approaching its all-time high, Bitcoin (BTC) still has not managed to surpass the record level of $ 60,805.
Although ETH is showing strong technical momentum and pushing its price up, on-chain analysis finds that it has “narrower” support compared to the support level in the bitcoin price.
Simply put, ETH may see a deeper correction compared to the bitcoin price in the foreseeable future should the market move negatively.
Why is Ether’s support weaker than Bitcoin?
Chainalysis chief economist Philip Gradwell said that the ETH price’s near-record support compared to Bitcoin is narrower. Gradwell argued that if the market sees a correction, the next major support level in ETH price is around $ 1,800.
Gradwell explained in his forecast based on the ETH accumulation trend, with the strongest demand at $ 1,800. He said:
“Ethereum price hit an all-time high this week, but cost curve analysis shows it has a narrower support base than Bitcoin price compared to Ethereum price, and the next strongest ETH demand area is at $ 1,800.”
Gradwell used a data source called “Ethereum USD cost held,” similar to whale clusters in the Bitcoin market, to estimate at what price level investors were saving ETH.
If the $ 1,800 support level breaks down and the market sees a sizable correction, the economist said $ 1,500 is the “very strong” next level of support for ETH.
A drop to $ 1,500 means that the ETH price will decline 30 percent from the current price of $ 2,100.
In retrospect, a 30 percent retracement occurs frequently during bull markets, but in the recent cryptocurrency uptrend, there has been no 20 to 30 percent retracement compared to the increase in 2017.
However, Gradwell highlighted that $ 1,500 is the macro support level for ETH in the short and medium term:
“The ETH market has changed radically in recent months, experiencing a significant increase in the cost of purchasing more than 50 million of the total supply of 115 million. Support for $ 1,500 is particularly strong. 33.3 million ETH, with a total cost of $ 58 billion, were purchased above this level.”
An important reason why ETH has a narrower support base than Bitcoin may be the small number of long-term investors.
After the summit in 2017, Gradwell discovered that a small group of investors continued to hold ETH despite seeing large losses.
The economist said that such a trend supports the concern that ETH at least has a weaker support base than Bitcoin.
Traders expect ETH to hit a record high
Traders trading in the short term expect ETH to see an upward trend despite concerns about the narrow support base.
Known as Blunts, the trader said that, based on the formation that bottomed out on the four-hour chart, ETH would likely set a new record ahead of BTC.
“It looks like ETH price is low. If ETH moves at this pace, it will be ATH before BTC.”
In addition to the favorable technical market structure, the hash rate of the Ethereum blockchain network reached an all-time high, according to Glassnode.
Previous ATH of 557,592,098,540,542 was observed on 08 April 2021
View metric:https://t.co/tgtxegUqBJ pic.twitter.com/nRBBhw5DaY
— glassnode alerts (@glassnodealerts) April 9, 2021
Therefore, both the basic data and the technical details of the price show that the momentum in the ETH price has a good chance of sustainability in the near term.