Ethereum’s Tipping Point: Why Traders Should Be Extra Cautious This Week

Key Insights

• Approximately 38% ($123 billion) of Ethereum's market cap is held by investors with very slim profit margins (0-20%).
• A fall in Ethereum's price below $2,300 could trigger a wave of panic selling and liquidations.
• Despite the market's fragile state, Ethereum whales have been accumulating.
• Ethereum's recent cross above the Gaussian Channel midline shows an "altseason" is approaching.
• Traders should watch the $2,300 support and $2,500 resistance levels for Ethereum to determine what comes next.

Ethereum had a strong run recently. However, underneath the surface, there are certain issues that traders should not ignore.

According to the latest on-chain data, a large chunk of Ethereum’s market cap is held by investors who are barely in profit.

This fragile position could quickly turn bitter if ETH’s price dips even slightly.

Panic, liquidations, and a possible market-wide sell-off could be a hair-trigger away, and here are the facts to note.

$123 Billion on a Cliff’s Edge

According to insights from Glassnode in a recent update, approximately $123 billion worth of Ethereum, or about 38% of its marketcap, was purchased within a price band just 0% to 20% below the current market rate.

This data came from the "Market Cap by Profit and Loss" metric, which attempts to identify ETH holders based on how far in profit (or loss) their holdings are.

Essentially, data shows that a massive amount of Ethereum investors are sitting on very slim profits.

If Ethereum’s price were to fall even slightly below $2,300, these holders could see their investments slip into the red.

Historically, when a large volume of capital flips to loss, the result turns into a wave of panic selling.

This could quickly turn into a liquidation spree and drag prices down further as more and more traders get kicked off their positions.

Thin Support, High Risk

Ethereum may be showing strength on charts, but that strength is sitting on a weak foundation.

The low profit margins of many holders mean that the current price is closer to walking on a tightrope than standing on solid ground.

Because of this, the ultimate support zone to watch is $2,300, because a move below this could start a panic.

This is especially true if the general market conditions or Bitcoin’s performance also turn bearish.

On the flip side, holding above $2,500 would build confidence and reduce the likelihood of these marketwide liquidations.

So far, ETH is managing to hover just above this danger zone and investors are holding their breaths.

Hope From The Whales?

Interestingly, not everyone seems worried. In fact, Ethereum whales holding between 10,000 and 100,000 ETH have been accumulating recently.

According to insights from analyst Ali Martinez in a recent update, there has been a steady increase in ETH holdings among large wallets.

These investors typically move large amounts of money only when they see long-term possibility or expect major price movement.

As such, this whale behaviour could indicate that the sentiment is bullish, and a price increase could be on its way.

However, it is currently unclear whether they are accumulating for long-term holding or preparing for a big breakout.

Ethereum and the Altseason Connection

One of the more interesting implications of Ethereum’s performance is the possibility of a new alt season.

Market analyst Moustache recently pointed out a major technical indicator called the Gaussian Channel.

According to the analyst, Ethereum has recently crossed the midline of this tool, and there might be explosive growth incoming as a result.

Keep in mind that the Gaussian channel is a trend-following tool that is used to identify major price movements.

This kind of breakout happened in 2020 and led to a 1,400% surge in altcoin market cap within a year.

Later in 2023, another breakout was followed by a 200% increase in the altcoin sector.

This would mean that if ETH maintains its uptrend, we could see history repeat itself with altcoins outperforming Bitcoin.

Given the current situation, Ethereum is at a crossroads, and investors should watch the support level at $2,300, because a fall below this could push many ETH holders into loss and spark a panic sell-off.

On the other hand, a break above the $2,500 resistance and above would restore confidence and reduce the chances of the market reacting harshly.

Disclaimer: Voice of Crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.