Ethereum Risks Another 10% Drop Against Bitcoin As $15.4 Million Exits ETH Investment Funds
Ethereum’s September 15th merger turned out to be a sell-news event, which looks set to continue.
In particular, Ether (ETH) fell significantly against the US dollar and Bitcoin (BTC) after the merger. As of September 22, ETH/USD and ETH/BTC trading pairs were down more than 20% and 17%, respectively, since Ethereum’s switch to Proof-of-Stake (PoS.
What do Ether bulls eat?
Several catalysts contributed to Ether’s fall in the aforementioned period. First, ETH’s price drop against the dollar saw it sync with similar drops elsewhere in the crypto market, fueled by the Federal Reserve’s 75 basis point (bps) interest rate hike.
Second, Ethereum faced a lot of flak for becoming too centralized after the merger.
Only five units produced 60% of the blocks so far. The largest share belongs to Lido DAO, an Ethereum staking service, which has deposited 4.19 million ETH, or over 30% of the total amount deposited into Ethereum’s official PoS smart contract.
Third, institutional investors, or “smart money”, also reduced their exposure to Ethereum-focused investment vehicles in the day before and after the merger.
Ethereum funds witnessed $15.4 million worth of capital outflows from their coffers in the week ending September 16, according to CoinShares’ weekly report. In contrast, Bitcoin-based mutual funds attracted $17.4 million in the same week, suggesting capital migration following the merger.
Finally, Ether also felt extreme selling pressure from the proof-of-work (PoW) miners, who sold $40 million worth of Ether in the days before the PoS update.
Independent market analyst Tuur Demeester noted that Ether may continue its decline against Bitcoin in the coming days, referring to ETH/BTC’s past reaction to key events in the Ethereum market, as shown below.
The chart shows Ether traders’ practice of pumping ETH against Bitcoin ahead of adoption-related narratives, such as the non-fungible tokens (NFT) and Defi craze of 2021, and the ICO boom of 2017.
All these rallies ended when the hype died down. Highlighting Ethereum’s switch to PoS as a similar hype phase that pushed ETH/BTC higher in 2022, Demeester expects the pair to undergo a deep correction in the coming weeks.
“I expect ETH/BTC to crash violently at some point,” he said, adding:
“ETH is a ticking time bomb.”
ETH/BTC Technicals Hint at 10% Fall Ahead
Placing these fundamentals against Ether’s technicals versus Bitcoin presents a similar bearish setup.
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On the three-day chart, ETH/BTC has fallen by almost 25% after topping out at 0.085 BTC, a level that coincides with its long-term resistance level at 0.081 BTC.
Now the pair is seeing an additional drop towards its multi-month rising trendline support, as illustrated below.
The trendline support is falling in sync with 0.06 BTC, a level that has acted as a retracement zone in 2022. In other words, another 10% decline is on the table.
ETH/USD’s bearish setup is worse
Against the dollar, Ether could fall as much as 45% due to what appears to be an ascending triangle pattern in a downtrend.
As a rule, the bearish continuation pattern disappears after the price breaks below the lower trendline and then falls by as much as the maximum height. Therefore, the bearish target is near $700 by the end of this year, down 45% from today’s price.
Conversely, a pullback from the lower trendline of the triangle could cause Ether to rise towards the upper trendline, signifying a rally towards $1,775, or a 35% gain from today’s price level.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trade involves risk, you should do your own research when making a decision.
