The price of ETH could drop another 25% this month, as evidenced by technical and fundamental indicators.
Ethereum’s native token (ETH) continued its decline against bitcoin (BTC) two days after successfully rehearsing the Proof-of-Stake (PoS) algorithm on its longest-running Ropsten testnet.
ETH/BTC fell 2.5% to 0.0586 on June 10th. The pair’s down move was part of a correction that started a day earlier when it reached a local high of 0.0598, indicating weaker bullish sentiment despite the bullish ‘confluence’ update.
Four-hour ETH/BTC price chart. Source: Trading View
Interestingly, the sell-off occurred around the ETH/BTC 50-4 hour exponential moving average (50-4 hour EMA; red wave) around 0.06. This technical resistance has capped the pair’s upward movement since May 12, as shown in the chart above.
Was Ether the cause of ETH/BTC weakness?
Ethereum’s strong bearish technical performance appears to have surpassed the PoS testnet breakout. According to Delphi Digital, the ongoing imbalance between Ethereum and its supposedly pegged Staked Ether (stETH) token could be the reason.
“The testnet merger was successful, but the ETH market did not react,” the cryptocurrency research firm wrote, adding:
“Concerns about the ETH-stETH connection are growing as the health of post-Terra financial institutions is questioned.”
Several DeFi platforms deploying Ethereum on the Ethereum PoS smart contract will not be able to access their funds if the merger is delayed. Consequently, they risk running into ETH liquidation issues when trying to pay back debt to their shareholders.
This may encourage these DeFi platforms to sell their existing stETH holdings for ETH. At the same time, if they run out of stETH, there is a risk that selling pressure will shift to their other holdings, including ETH.
If Swissborg tries to close out their entire stETH position, they will drop the bracket one more penny.
More importantly, this will use up 25% of the remaining ETH liquidity in the pool. Swissborg is also contributing several thousand Eth to this pool… 6/pic.twitter.com/sWIdzMWNvU
– Dirty Bubble Media: ⏰ (@MikeBurgersburg) June 8, 2022
Other downsides to Ether price?
From a technical standpoint, Ether’s recent decline against Bitcoin pushed ETH/BTC below a multi-month support level around 0.0589, which sent the pair another correction in June, followed by 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 pair’s next downside target lies near the 0.5 Fibonacci line on the same chart, near 0.0509, a new 2022 low.
Weekly ETH/BTC price chart. Source: Trading View
Interestingly, the 0.0509 level is close to the ETH/BTC 200-week exponential moving average (200-week EMA; blue wave) and its multi-year uptrendline support. Taken together, this confluence of support could be where ETH/BTC ends its bearish cycle, allowing the pair to reach 0.0589 as an interim recovery target.
Related: 3 Reasons Bitcoin is Reclaiming Its Dominance in the Crypto Market
Conversely, another break below the confluence could see Ether see 0.043 BTC (near the 0.618 Fibonacci line) as the next downside target, almost 25% below the June 10 price.