$15.4 million came out of the leading altcoin Ethereum (ETH) mutual funds. According to analysts, in this environment, Ethereum risks another 10% drop against Bitcoin. Also, analysts paint an even more pessimistic picture on ETH/USD.
What is eating the leading altcoin Ethereum bulls?
As you follow on Kriptokoin.com, Ethereum Merge was successfully completed on September 15th. However, this development emerged as a ‘sell the news’ event. Also, it looks like this situation will continue. Notably, Ethereum (ETH) fell significantly after the Merge against the US Dollar and Bitcoin (BTC). As of September 22, ETH/USD and ETH/BTC trading pairs have dropped more than 20% and 17% respectively since the Ethereum Merge.
ETH/USD and ETH/BTC daily price chart / Source: TradingViewMultiple catalysts contributed to the decline of ETH during the said period. First, ETH’s price drop against the dollar came in sync with similar dips elsewhere in the crypto market, driven by the Federal Reserve’s 75 basis points (bps) rate hike.
Second, Ethereum has become very centralized after Merge. That’s why it faced a lot of criticism. So far, only five organizations have produced 60% of the blocks. The largest stake belongs to Lido DAO, an Ethereum staking service with 4.19 million ETH deposited, or more than 30% of the total amount invested in Ethereum’s official PoS smart contract.
Total value of ETH 2.0 staked by provider / Source: GlassnodeThird, institutional investors, or ‘smart money’, reduced their exposure to Ethereum-focused investment vehicles in the days before and after Merge. According to CoinShares’ weekly report, Ethereum funds saw $15.4 million worth of capital outflow from their coffers in the week ended Sept. 16. In contrast, Bitcoin-based mutual funds attracted $17.4 million in the same week. This shows the post-Merge capital migration. Finally, the leading altcoin felt extreme selling pressure from PoW miners who sold $40 million worth of ETH in the days before the PoS update.
“This altcoin is a time bomb”
Independent market analyst Tuur Demeester cites ETH/BTC’s previous reaction to key events in the Ethereum market, as shown below. In this context, he notes that Ether will likely continue its decline against Bitcoin in the coming days.
ETH/BTC price performance around key Ethereum events / Source: TradingViewThe chart shows ETH traders pumping ETH against Bitcoin before narratives about the Non Fungible Token (NFT) and adoption such as the DeFi craze in 2021 and the ICO boom in 2017.
All these rallies turned out to be busts after the hype waned. Demeester highlights Ethereum’s transition to PoS as a similar phase of hype pushing ETH/BTC up in 2022. Accordingly, he expects the pair to go through a deep correction in the coming weeks. The analyst says:
I expect ETH/BTC to crash drastically at some point. ETH is a ticking time bomb.
ETH/BTC technical indicators point 10% down
Analysts draw attention to the following technical picture for the ETH/BTC parity. Placing these fundamentals against Bitcoin’s technical specifications of Ether is similarly bearish. On the three-day chart, ETH/BTC is down about 25% after peaking at 0.085 BTC. This coincides with the longstanding resistance level of 0.081 BTC. Now, the pair is seeing an additional drop towards the multi-month ascending trendline support, as shown below.
ETH/BTC three-day price chart / Source: TradingViewTrendline support is falling in sync with 0.06 BTC, a level that serves as a retracement zone in 2022. In other words, there is another 10% drop on the table.
ETH/USD’s bearish bias is worse
Analysts are even more pessimistic for the ETH/USD pair. Against the Dollar, it is possible for ETH to drop as low as 45% due to the ascending triangle pattern in the downtrend.
ETH/USD three-day price chart with ‘ascending triangle’ pattern / Source: TradingViewAs a rule, the downtrend dissolves after the price drops below the lower trendline. Then it drops to its maximum height. Therefore, the bearish target stands at around $700, down 45% from today’s price by the end of the year.
Conversely, it is possible that a pullback from the lower trendline of the triangle will cause ETH to rise towards the upper trendline. That means a rally towards $1,775. In other words, it marks a 35% gain from current price levels.
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