Ethereum’s native token (ETH) resumed its decline against Bitcoin (BTC) two days after successfully rehearsing its Proof of Stake (PoS) algorithm on its longest-running “Ropsten” testnet.
ETH/BTC fell 2.5% to 0.0586 on June 10th. The downward movement of the pair was part of the correction that began the day before, when it reached a local peak of 0.0598, hinting at a weakening of bullish sentiment, despite the optimistic “merger”. Update.
Interestingly, the sell-off occurred around the 50-4H ETH/BTC exponential moving average (50-4H EMA; red wave) around 0.06. This technical resistance has capped the pair’s bullish efforts since May 12, as shown in the chart above.
Ether rate due to ETH/BTC weakness?
Ethereum’s strong bearish technical performance seems to have overpowered its PoS testnet breakout. The reason for this could be the ongoing imbalance between Ethereum and its supposedly pegged token Staked Ether (stETH), according to Delphi Digital.
“The testnet merger was successful, but the ETH market didn’t react at all,” crypto research firm. wroteadding:
“Concerns about the ETH-stETH link are rising as the health of post-Terra financial institutions is questioned.”
Several DeFi platforms that have invested Ethereum in the Ethereum PoS smart contract will not be able to access their funds if the merger is delayed. As such, they risk running into ETH liquidation issues while trying to pay off their shareholders.
This may encourage these DeFi platforms to sell their existing stETH holdings for ETH. Meanwhile, if they run out of stETH, selling pressure risks shifting to their other holdings, including ETH.
If Swissborg tries to close their entire stETH position, they will lower the peg by one more cent.
More importantly, it will absorb 25% of the remaining ETH liquidity in the pool. Swissborg also contributes several thousand Eth to this pool… 6/ pic.twitter.com/sWIdzMWNvU
— Dirty Bubble Media: ⏰ (@MikeBurgersburg) June 8, 2022
More downsides to Ether price?
From a technical standpoint, Ether’s latest decline against Bitcoin pushed ETH/BTC below a multi-month support near 0.0589, putting the pair in further correction in June and then Q3 2022.
The broken support level coincides with the 0.382 Fibonacci line on the Fibonacci retracement chart, as shown in the chart below. If the ETH/BTC correction continues, the next downside target for the pair will be the 0.5 Fibonacci line on the same chart near 0.0509, a new 2022 low.
Interestingly, the 0.0509 level is near the 200-week exponential moving average of ETH/BTC (200-week EMA; blue wave) and its multi-year uptrendline support. Together, this confluence of support could be where ETH/BTC ends its bearish cycle, allowing the pair to reach 0.0589 as an interim bounce target.
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Conversely, a further break below the confluence could prompt Ether to look at 0.043 BTC (near the 0.618 Fibonacci line) as the next downside target, nearly 25% below today’s price.
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Credit : cointelegraph.com