The Glassnode analyst pointed out that Ethereum is again testing a dense supply cluster, which could set the tone for the cryptocurrency’s future course.

Ethereum for CBD is trading intensely

In the recent one post in X, Glassnode analyst Chris Beamish talked about what Ethereum looks like from a cost-based distribution (CBD) perspective. CBD is an on-chain indicator that tells us the total amount of ETH that investors have recently purchased at the various levels that the cryptocurrency has visited in its history.

Below is a chart provided by Beamish that shows the CBD heatmap for Ethereum.

As you can see in the chart, Ethereum’s November low resulted in the formation of a dense supply cluster for CBD around the $2,750 level. Interestingly, since then the zone has repeatedly acted as a barrier to support for this asset.

The explanation for this trend may lie in investor psychology. Generally speaking, investors are sensitive to a retest of the cost basis because it may lead to a reversal of the profit-loss balance. Therefore, you may find that they will show some movement when it happens.

When a retest occurs from the top, holders may respond by accumulating more to defend their break-even point. This is a pattern that has potentially been seen since the November low. It is clear from the chart that Ethereum retested the $2,750 supply zone twice in December, and both times the asset was able to rebound.

The third retest recently took place and so far the support has held, but time will tell how long the coin will stay above it. “A hold here suggests absorption and base building, but a breakdown would move the price towards thinner support where underwater supply could mock,” the analyst explained.

Typically, regions where a enormous amount of supply is divided on a cost basis tend to be significant sources of support/resistance. The $2,750 cluster may fall into this category, but that doesn’t make it indestructible. “The next move depends on this level,” Beamish noted.

In other news, Ethereum has recently witnessed a decline in transaction fees, as highlighted by Glassnode in X post.

Following this collection, transaction fees on the Ethereum blockchain dropped to their lowest level since May 2017, which may indicate a decline in network activity.

ETH price

At the time of writing, Ethereum is trading around $2,950, down 1.5% over the past week.