Cost curve analysis suggests Ethereum has strong support around $1,500

Ethereum just reached its all-time high (ATH) at around $2150 a few days ago. The king of Alt. coins has led their recent resurgence, as Bitcoin has been stuck below its most recent ATH for weeks. Below ETH’s peak price, the next strongest level of observed demand comes in at $1,800 — much stronger support, however, comes in at $1500, according to the cost of acquisition data, by Chainalysis Market Intel. An earlier piece on Bitcoin suggested similar support for BTC coming in at $50k.

This phenomenon basically shows us how much cryptocurrency is held by people who are willing to buy and hold at least at their cost of acquisition. The report analyzes 115 million Ethereum held by 1,525 groups of entities, grouped by — whether they are a personal wallet or a business, the length of time they have held Ethereum, the amount of Ethereum they hold, the USD gain they have made since they acquired their Ethereum, and the extent to which they send on the Ethereum they receive (liquidity).

The chart above presents a picture of this metric. Vertical ascent right around the $1800 price level shows a very large amount of Ethereum is held by entities that they acquired around this price level. Beyond $1850, a relatively smaller amount of 700k costing $1.4 billion was bought. This suggests that the second-largest crypto has a bigger room for correction below its ATH and the support of $1800, but much stronger support exists at $1500.

There are a couple of assumptions in this analysis. First, the cost of acquisition, which is calculated as a weighted average across the holdings of an entity. In simpler words, if an entity buys ETH at both a high price and a low price — then the cost of acquisition would be somewhere in the middle. Large DeFi contracts are an example of this calculation. An example of this is 7.4 million Ethereum with an average cost of acquisition of $1,818 that is held in the Wrapped Ether Contract.

Cost of acquisition data also only considers Ethereuem on-chain data — not taking into account the ETH transactions taking place on centralized exchanges. This could be good for Ethereum since retail traders might provide better support for the digital coin on these exchanges. Also, the previous assumption might not be a limitation anymore since most Ethereum trading is increasingly shifting to on-chain DeFi trades.

Ethereum is trading around $2060 at the time of writing, after falling to $1925 earlier.

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