Why 5% Ethereum bounce could be deceptive as $2.7K emerges as ‘battleground’

Key Takeaways

Are there notable buyers in the market?

Though selling pressure was dominant in recent weeks, accumulation addresses and institutional DATs continued to add to their Ethereum holdings.

What is the significance of realized price levels?

These levels are psychologically and technically important because they have the power to determine the next trends. 

Ethereum [ETH] fell to $2,956 on Tuesday, 18 November. However, it has since bounced by 5.4% within a day to hit $3.2k. The Crypto Fear and Greed Index showed a reading of 15 as Bitcoin [BTC] bounced back above the $90k-mark.

It may be safe to say that despite this minor bounce, sentiment has remained wrecked. Traders and investors will see any price bounces as an opportunity to sell, to book profits, or get out at break-even.

Source: CryptoQuant

The market-wide pessimism did not affect Ethereum accumulation addresses though. In fact, their ETH balances have kept growing amidst the turmoil in recent weeks. At the time of writing, the realized price for accumulation addresses was $2,880.

The 14-day moving average of the netflow to exchanges metric has also been negative so far.

In the face of relentless selling pressure, some holders, including institutions, have continued to accumulate more though – An encouraging sight.

Key levels to watch during the Ethereum descent

Source: CryptoQuant

Make no mistake – The trend on the daily chart was bearish, and the weekly chart showed that a retracement to $2.7k was possible. The realized price metrics helped plot where key support levels were.

The realized price is the average cost basis for the market. Using these metrics for addresses sorted by balance, we can see where the realized prices of individual cohorts are.

At press time, the ~100k+ holder addresses had a realized price of $2,600, while the other large cohorts were clustered between $2,790-$2,920.

Source: CryptoQuant

The market-wide realized price was $2,316, marking yet another crucial support. During the retracement in April, Ethereum’s price fell well below the realized price, reaching a low of $1,473.

This goes to show that the realized price support levels are reliable, but not infallible. Traders and investors should be prepared to buy at those levels if their strategy calls for it, but also be prepared to exit at an acceptable loss if their ideas do not work out.

Source: ETH/USDT on TradingView

The 1-day price chart, as mentioned earlier, has been on an evident downtrend too. The series of lower highs and lower lows since September has not yet been broken. The OBV also reflected steady selling pressure, especially after the 10/10 crash.

The price action from May to July indicated that the $2,521-level is another support level.

We have a collection of support levels from $2.9k to $2.3k. It is unclear if any of them can halt the bearish trend for a meaningful amount of time, or even force a trend reversal.

Traders and investors must keep an eye on $2.7k, the 78.6% weekly Fib retracement level, and $2.5k, the critical level from the price action that ensued in May.