ETH rebounds to key supply zone, testing HODL's belief that a $2.6K breakout could determine Q3 trend

After nearly two weeks of sustained selling pressure at Ethereum [ETH], a strong 8.27% green candle appeared, recovering nearly 21% of its losses in one fell swoop as of press time. On closer inspection, this is similar to a textbook "reset and rebound" setup, i.e. cooling provides patient investors with the opportunity to buy supply at a discounted price as macro FUDs begin to ease. However, the line between a relief rally and a breakout can be very subtle. Which side Ethereum ultimately goes will most likely determine its directional preference heading into Q3.

Ethereum is close to a heavy supply area. Once again, Ethereum's decline in the last two weeks has been significantly more dramatic than [BTC], with ETH down 26% from its peak of $2,878 in mid-June, more than double BTC's 10.89% decline. It's not just a fluke. While Bitcoin has shown relative resilience, (STH) NUPL, a short-term holder of Ethereum, fell straight into the capitulation zone when ETH fell below the $2.5k mark, after ETH had been trading in a narrow range around that level for nearly a month. This is further confirmed by the surge in actual losses, suggesting that STH is starting to unwind its positions in the midst of weakness.

Now, with ETH recovering to the $2.5k region, these holders may see the rally as a breakeven escape opportunity as Ethereum re-enters a high-density cost-based cluster, as shown in the chart below. The yellow and orange bands highlight where the majority of Ethereum holders have purchased their supplies, which are massively clustered around the area. Many of the entry points are in the $2.4k to $2.6k range, which makes it one of the most crowded and critical areas to watch as ETH approaches the resistance level.

If ETH breaks out of this area strongly, it could clear the way for further gains. But if a weak hand intervenes to exit at breakeven, it could turn into a near-term ceiling.

ETH faces a real test of the faith of HODLers. As Ethereum climbs to a key cost base cluster, whether holders remain confident that it will continue to move higher could impact Q3. Despite the excellent performance in Q1 and Q2, ETH has not managed to reclaim the $3k level, which is a psychological barrier that may prompt some investors to sell off early, especially as macro risks remain.

That's why the recent $100 million ETF inflow is encouraging, as it shows that there are still new inflows. Coupled with a 9.3% increase in open interest in ETH perpetual contracts on a trading platform and a 61% bias for bulls, it is clear that the market is leaning towards bullishness.

But is this a belief? Or are we seeing blind optimism, is this the setup for yet another volatility-driven oscillation as ETH approaches resistance?

Well, BlackRock's recent $18.4 million sell-off adds a layer of caution. Savvy money seems to be pulling back as well. So, unless Ethereum can break through the $2.4k to $2.6k supply wall strongly, the idea of a clean $3k Q3 may be difficult to achieve for the time being.