key takeaways
- The market cap of bitcoin has dropped by over 2,000 points in the past 24 hours.
- Similarly, Ethereum posted a decline of 7.5%, erasing recent gains.
- Bearish puts BTC and ETH at risk of a sharp correction.
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Volatility hit the cryptocurrency market before Ethereum’s transition to proof-of-stake. As the merger nears, it appears that Bitcoin and Ethereum are preparing for a significant price movement.
Bitcoin and Ethereum are at risk
Bitcoin and Ethereum have rallied over 7% in the past 24 hours, raising the risk of a steeper correction.
The recent selloff may have shocked investors as long positions worth over $220 million were liquidated. US inflation in August appears to have declined less than analysts’ expectations, with more emphasis on rising speculation about Ethereum’s transition to proof-of-stake. Now, it remains to be seen whether the “merge” can become a “sell news” phenomenon.
The 50-day moving average rejected the leading cryptocurrency’s uptrend. As the price continues to decline, the nearest support level appears to be the lower boundary of the parallel channel that developed over the past month on the daily chart. If this level of $18,700 fails to sustain, a decline towards the June 2019 high of $13,880 can be expected.
Bitcoin needs to acquire the 50-day SMA at $22,000 as support to invalidate the pessimistic outlook and give a chance to move further above the 200-day SMA at $29,000.
Ethereum is also causing trouble as it seems to be forming a head and shoulders pattern on its daily charts. An increase in selling pressure that sent ETH below $1,500 could validate this bearish formation. If this happens, a 30% correction to $1,000 could be triggered.
It is worth noting that Ethereum needed to make a U-turn and print a daily close above $1,800 to invalidate the bearish thesis. If this happens, ETH could find strength to move towards the 200-day SMA at $2,100.
Given the amount of anticipation surrounding the merge, an increase in volatility can be expected. To better understand where the trend will resolve, it is imperative to wait for Ethereum to transition to proof-of-stake.
Disclosure: At the time of writing, the author of this article holds BTC and ETH.
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