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Ethereum [ETH] recently experienced a significant downturn, plummeting to multi-year lows near $1,400. This sharp decline was largely attributed to whale capitulation, evidenced by substantial drawdowns in long-term holder balances and considerable realized losses among large wallet holders.
However, since this capitulation event, Ethereum has staged a notable recovery, climbing over 25% to trade around $1,760 at press time. This rebound has been fueled by strategic dip-buying from well-capitalized investors and a decrease in prevailing macro and sector-specific fears. The crucial question now looming over the market is whether this recovery represents a temporary window for investors to break even, or if Ethereum is establishing a firm structural foundation for a sustained bullish trend.
Cost Basis Undercut Creates Overhead Resistance
Currently, Ethereum is trading approximately 12% below its realized price of $2,002. This indicates that the average Ethereum holder is currently in a net unrealized loss position. Historically, such a scenario has often signaled a market undergoing correction or consolidation, where the conviction of long-term holders faces a significant test.
Analysis of past market cycles, such as the 2018 downturn, reveals that periods of average holder capitulation, coupled with insufficient buying pressure to absorb the available ETH supply, can lead to substantial price declines until a definitive market bottom is established. Consequently, unless Ethereum can reclaim and consistently maintain levels above its realized price, the most likely price trajectory remains sideways to potentially bearish. Any upward movement towards the $2,000 mark could encounter significant profit-taking from investors who bought in at higher levels and are now underwater, thereby solidifying this level as a key area of overhead resistance.
Accumulation by “Never-Sold” Wallets Hints at Bullish Potential
Intriguingly, data from CryptoQuant has unveiled a subtle yet potentially significant pattern emerging within Ethereum’s on-chain activity. A notable surge in inflows is being observed in a specific cohort of wallets – those with a history of never selling and adhering strictly to an accumulation-only strategy.
Over the past 48 hours, these addresses have received an influx of over 640,000 ETH, marking the largest inflow recorded since 2018. This accumulation activity, particularly given that Ethereum‘s price is considered significantly undervalued, suggests that these long-term, conviction-driven holders might be signaling a future price appreciation that the broader market has yet to fully recognize. The subsequent 15% rebound following this accumulation phase establishes a structurally bullish range, potentially providing a robust base for future upward momentum.
This on-chain behavior suggests that instead of mirroring the protracted capitulation seen in 2018, Ethereum might be entering a consolidation phase akin to the 2022-2023 period, where price action remained range-bound below $2,200 before eventually breaking through resistance in the first quarter of 2024.
Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.
Also Read: $8.05 Billion in Bitcoin and Ethereum Options Expire Today—Brace for Volatility
I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.
