Ether’s Record Run Came With Less Support Than Bitcoin’s, Blockchain Analysis Shows

Compared to Bitcoin’s (BTC) rally to a record price of over $ 61,000 in March, Ether’s recent uptrend to an all-time high of over $ 2,100 was helped by lower demand from buyers, according to a leading blockchain data analyst.

Philip Gradwell, chief economist at Chainalysis, said on CoinDesk TV’s “First Mover” that “relatively little” ether (ETH) was bought at prices above $ 1,850 and even less at $ 2,000 or more.

“The reason this matters is because the price people are willing to buy and hold tells us what demand is at that price level,” Gradwell said. “So not much demand at that price of $ 2,000.”

Source: chain analysis

As of April 5, blockchain data showed there was significant ether accumulation at prices around $ 1,800, Gradwell wrote in a newsletter this week. This price level should offer strong support, as the acquisition costs indicate the historical demand for a cryptocurrency at different price levels. The analysis assumes that buyers are unlikely to sell their crypto-asset at prices below their cost.

Only around 700,000 ETH were purchased at a cost of at least $ 1,850, which cost around $ 1.4 billion on April 5, three days after Ether hit a new high, Gradwell wrote. In contrast, on March 29 – two weeks after the Bitcoin price peaked – 238,000 BTC worth around $ 14 billion were purchased at or above $ 57,000.

The latest all-time high [ether] The price of $ 2,151 was well above a high level of support, suggesting that the peak was driven by relatively low demand, ”Gradwell wrote. “This is in contrast to Bitcoin, which previously had greater demand over a high price level.”

The following graphic from Gradwell’s April 1st newsletter also shows that 0.1 million Bitcoin were purchased at prices above the spot price on March 29th:

Source: chain analysis

The human bias

The exercise highlights the limits of using blockchain data to analyze market movements: while the data can provide additional transparency and help investors and traders understand where cryptocurrency is moving on the networks, the data can also be misleading and confusing The interpretation also relied on people as assumptions about investor psychology. .

Gradwell said on CoinDesk TV that his analysis included some potential “downside bias” that could skew the supportive price level of Ether at the lower end.

The analysis did not capture the prices of sales and deals made on central exchanges.

However, Gradwell argued that he was “not worried about such a downward tilt” given the increasing shift in the airwire trade to decentralized finance (DeFi) that can be tracked on the blockchain.

At the same time, Gradwell’s analysis also smooths the cost curve of companies that have purchased ether at different prices, which can potentially skew the supporting price level.

“Large companies like DeFi contracts tend to hold many ETH companies that were acquired at both low and high costs,” he wrote in the newsletter. “For example, 7.4 million ETH with an average acquisition cost of $ 1,818 are included in the packaged ether contracts.”

On the upside, CoinDesk’s Lawrence Lewitinn said on the CoinDesk TV show that Gradwell’s analysis is based on the assumption that people wouldn’t sell their airwaves at a loss. If ether holders are willing to sell their ether at a loss, it means the USD 1,800 support level may be less strong than expected.

According to Gradwell, a majority of investors who bought ether at its peak in 2018 were selling their ether at a loss, while at the time more bitcoin holders continued to hold their bitcoin in the bear market.

“The persistence of a small but very bullish cohort of ether buyers supports my concern that the highest ether prices tend to have a tight support base, at least when compared to Bitcoin,” Gradwell wrote.

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