Ethereum is navigating a period of heightened volatility and uncertainty as it hovers around the critical $2,000 threshold. While recent price action suggests temporary stabilization after weeks of selling pressure, conviction remains limited. The $2,000 level is functioning less as confirmed support and more as a psychological battleground where short-term positioning, liquidity conditions, and sentiment are colliding.A recent analysis from Arab Chain offers additional structural insight through the ETH Binance Liquid vs. Illiquid Supply Model. This framework separates Ethereum held on Binance into liquid supply — coins readily available for trading — and illiquid supply, which is comparatively less likely to move in the short term. As of February, Binance’s total ETH reserves stand at approximately 3.57 million ETH. Of this amount, around 1.16 million ETH is classified as liquid supply, while 2.40 million ETH is categorized as illiquid.This distribution matters. A relatively smaller liquid component can limit immediate sell-side pressure, but it does not eliminate risk if sentiment deteriorates. Conversely, a larger illiquid base may reflect longer holding behavior or strategic positioning rather than imminent distribution.At a moment when price hovers near a key technical pivot, the composition of exchange reserves becomes a meaningful variable in assessing Ethereum’s next structural move.Liquid vs. Illiquid Supply Signals A Fragile EquilibriumThe current reserve composition on Binance suggests Ethereum is operating within a structurally balanced environment rather than an immediate distribution phase. With illiquid supply accounting for the majority of the 3.57 million ETH held on the platform, a substantial portion of coins appears relatively dormant. Illiquid balances are typically associated with longer holding horizons or reduced trading frequency, which tends to dampen immediate sell-side pressure.This matters at a time when ETH is hovering near $2,000. A dominant illiquid share implies that most holders are not actively positioning for a rapid exit. In previous cycles, sharp increases in liquid supply often preceded volatility spikes, as coins became readily available for market execution. That dynamic is not yet evident at scale.By contrast, liquid supply historically expands during speculative phases, when traders rotate capital aggressively or prepare for directional exposure. The absence of a pronounced expansion suggests that, for now, speculative intensity remains contained.The relatively stable gap between liquid and illiquid supply indicates equilibrium between holding behavior and active trading. However, this balance is conditional. A meaningful shift toward higher liquid supply would increase the probability of renewed volatility. Conversely, sustained illiquid dominance could help absorb price shocks and moderate downside acceleration.Ethereum Tests Long-Term Support As Downtrend AcceleratesEthereum remains under structural pressure as price hovers near the $2,000 region following a sharp breakdown from the $3,200–$3,400 zone. The weekly chart shows a clear loss of bullish structure, with lower highs forming since the late-2025 peak and momentum decisively shifting to the downside.Price is now trading below the 50-week and 100-week moving averages, both of which are beginning to flatten or slope downward. This configuration typically signals weakening intermediate momentum and a transition into a corrective phase. Notably, Ethereum briefly tested levels near $1,800 before bouncing, suggesting the presence of reactive demand in that liquidity pocket. However, the recovery remains limited and has not yet reclaimed key moving averages.The 200-week moving average, positioned lower on the chart, remains upward sloping, indicating that the broader macro trend has not fully reversed. Historically, this level has served as strong structural support during deeper cycle corrections. If downside pressure resumes, this zone could become a critical area to monitor.Volume expanded significantly during the recent selloff, reflecting forced positioning adjustments rather than gradual distribution. Since then, activity has moderated, pointing to temporary stabilization.Featured image from ChatGPT, chart from TradingView.com