Ethereum’s native token Ether (ETH) slumped on June 16, suggesting that its reduction rally, coinciding with the Federal Reserve saying it should hike the benchmark price by 0.75%, is in danger.
Ether bulls trapped?
Ether’s worth slipped by 9.2% to round $1,120 per token a day after it rebounded by 23% after dropping to nearly $1,000, its worst degree since January 2021.
The ETH/USD pair’s upside transfer, adopted by a pointy correction, appeared in tandem with U.S. shares, confirming that it traded like a risk-asset.
The decline signifies that Ether has shed 77% of its worth since November 2021 and is now buying and selling beneath its “realized price” of $1,740, data from Glassnode shows.
In addition, a higher interest rate environment adds more selling pressure, with investors leaving high-risk trades and seeking safety in traditional hedging assets, such as cash.
Investors’ faith in cryptocurrencies has also eroded following the collapse of Terra (originally LUNA, now LUNC), a $40 billion algorithmic stablecoin project, and lending platform Celsius Network’s decision to halt withdrawals.
Atop that, Three Arrow Capital, a crypto hedge fund that oversaw nearly $10 billion in May 2022, reportedly faces insolvency risks. Fears about systemic risks have further limited the crypto market’s recovery bias, hurting Ether.
ALERT: 3AC $250 Million $ETH Place Will Be Liquidated at ≈1000
— Market Meditations (@MrktMeditations) June 15, 2022
From a technical perspective, Ether’s latest beneficial properties appear like a bear market rally, which could possibly be on account of traders overlaying their quick trades.
Intimately, traders shut their quick positions by shopping for the underlying asset again in the marketplace—sometimes at a worth lower than the one on the time of borrowing—and returning them to the lender. That prompts the asset to rally between giant draw back strikes, however it doesn’t signify a bullish reversal.
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These minor rallies could possibly be a bull entice for traders that mistakenly see the rebound as an indication of bottoming out.
Alternatively, skilled bears make the most of the pump to open new quick positions on the native worth prime, figuring out that nothing has essentially modified concerning the market.
ETH “bear pennant” hints at extra losses forward
Bear pennants are bearish continuation patterns that form as the price consolidates inside a triangle-shaped structure after a strong downside move.
As a rule of technical analysis, traders measure a bear pennant’s profit target by subtracting the breakdow point from the height of the previous decline (called “flagpole”), as shown below.
This puts the next bear target for ETH price at $850, down almost 25% from June 16’s price.
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